Korea Information & Communication, Chairman Park Heon-seo's Children's Company Suffers Billions in Losses After Investment

56 Billion Won of Company Funds Invested and Written Off
Additional Investment Executed in CB
Doubts About Stock Conversion and Recovery Possibility

Photo by Korea Information and Communication website capture.

[Asia Economy Reporter Jang Hyowon] It has been revealed that Korea Information & Communication invested billions of won in a U.S. bio company established by Chairman Park Heon-seo’s children and subsequently recorded the entire amount as a loss.

According to the Financial Supervisory Service’s electronic disclosure on the 30th, as of the end of the first half of this year, Korea Information & Communication holds a 21.23% stake in the U.S. bio company Oncosynergy, Inc. Korea Information & Communication first invested in this company in 2013.

As of the end of the first half of this year, Korea Information & Communication’s investment amount in Oncosynergy is approximately 5.6 billion KRW. However, the book value is zero. This is because every time Oncosynergy, classified as an associate company, incurs losses, the equity method is applied to reflect the losses in the book value.

Oncosynergy is in a state of complete capital erosion with assets of 4 billion KRW and liabilities of 6.1 billion KRW as of the first half of this year. It incurred losses of about 1 billion KRW in just half a year. Currently, the book value is zero, so the equity method is no longer applied, but the cumulative unrecognized changes in equity exceeding 700 million KRW have not been recognized.

Despite investing 5.6 billion KRW and recording it all as a loss, Korea Information & Communication acquired convertible bonds (CB) of Oncosynergy worth 1.2 billion KRW in the first half of this year. CBs are bonds that can be converted into the company’s stock instead of being repaid in cash in the future.

From an investor’s perspective, shares of unlisted companies are not actively traded, so CBs have limited utility. Even if the company converts the CBs into shares due to lack of cash for repayment, selling them is not easy. Moreover, because of the stock conversion option, the interest rate is relatively low. Therefore, investment banks (IB) generally prefer CB investments in listed companies or companies expected to go public in the near future.

Oncosynergy is a bio company that owns a new drug substance called ‘OS2966,’ which is being developed as a treatment for solid tumors and hematologic cancers. It is currently conducting a Phase 1 clinical trial for recurrent glioblastoma, a malignant brain tumor, at the Moffitt Cancer Center in Florida, USA. It is still far from being listed.

Nevertheless, Korea Information & Communication’s full support for this company is analyzed to be related to ownership. The co-founder of this company is Park Chan-eung (Catherine C. Park), the daughter of Chairman Park.

Ms. Park completed her residency in radiation oncology at Harvard Medical School and is currently working in the Department of Radiation Oncology at the University of California, San Francisco (UCSF). She currently holds about a 2% stake in Oncosynergy. Chairman Park is also listed on Oncosynergy’s board of directors.

A Korea Information & Communication official said, “Oncosynergy had no short-term performance, so we initially wrote down the investment. In the U.S., unlisted companies often attract investments through convertible bonds. Although I don’t know the details well, there were discussions with the founders when Oncosynergy was established, and several company executives became registered directors of Oncosynergy.”

Meanwhile, Chairman Park has one son and one daughter. His son, Executive Director Park Chan-du (Stephen C. Park), has been working at Korea Information & Communication for 11 years and holds 21.2% of Korea Information & Communication’s shares through the U.S.-based investment firm Primax Management, Inc., where he is affiliated. Korea Information & Communication operates value-added network (VAN) and electronic payment gateway (PG) businesses under brands such as EasyCheck.