[Funding] Maxst's Secret to Issuing 0% CB in a High-Interest Era

[Asia Economy Reporter Hyungsoo Park] Maxst is issuing the first tranche of convertible bonds (CB) to raise funds for the development and operation of metaverse services. The zero percent maturity interest rate stands out amid rapidly rising benchmark interest rates.

According to the Financial Supervisory Service's electronic disclosure system on the 9th, Maxst is issuing the first tranche of CB worth 21 billion KRW to Hanyang Securities, Hana Tech Value Up Fund, Hana Collabo Pree IPO Fund, and others. The maturity date is November 10, 2027, and conversion to common stock is possible from November 10, 2023. The conversion price is 11,044 KRW, which is not significantly different from the current stock price.

The conversion price adjustment (refixing) due to stock price decline can go down to 7,731 KRW. The conversion price adjustment dates are set every 7 months starting from June 10 next year, which is 7 months after the bond issuance date.

The early redemption right (put option) can be exercised every 3 months starting from November 10, 2024, which is 24 months after the bond issuance date. Maxst will pay the principal on the early redemption payment date.

The CB subscribers can convert to common stock and profit when Maxst's stock price rises in the future. With the benchmark interest rate rising, the CB funding cost is also increasing. Institutional investors seem to have judged that Maxst's stock price is near the bottom and have subscribed to the CB.

Founded in 2010, Maxst is engaged in augmented reality (AR) development platforms, industrial AR solutions, and extended reality (XR) metaverse platforms. This year, it has accelerated commercialization of metaverse-related businesses. It recorded 1.9 billion KRW in sales and an operating loss of 4.1 billion KRW in the first half of the year. Although sales are increasing, the loss scale remains large.

Earlier, Maxst raised 33 billion KRW through a rights offering followed by a general public offering of forfeited shares in April. At that time, due to the stock price decline, it failed to raise the planned amount approved by the board. At the board resolution on January 24, the new shares were issued at 32,950 KRW, about 40% lower than the expected issue price of 47,400 KRW. The funding scale decreased from 52.7 billion KRW to 36.6 billion KRW.

Due to the reduced funding scale, the operating fund usage plan was changed. The investment in the metaverse portal business was planned at 10 billion KRW but was cut to 1 billion KRW. The metaverse portal will be built based on XR space construction technology. It provides service tools that enable easy and fast connection between the real world and the metaverse world.

Although the budget reduction raised concerns about slower commercialization speed compared to the plan, the CB issuance will expand investment funds. With bold bets from institutional investors, Maxst has secured momentum to preoccupy the metaverse market.