Laemon Lane Dispute Moves to Negotiation Phase... Announces Shareholder-Friendly Measures

P&I Steps Back from Shareholder Proposals Including Auditor Appointment
Withdraws Lawsuit for Accounting Book Inspection
Coordinates Detailed Plan to Boost Stock Price Damaged by Third-Party Allocation Rights Offering

RemonRain, a KOSDAQ content company whose stock price soared due to the success of ‘The Youngest Son of a Conglomerate Family,’ has overcome a dispute hurdle. P&I Investment, which had publicly announced a shareholder proposal, withdrew its ‘lawsuit for inspection and copying of accounting books’ and entered negotiations with RemonRain regarding shareholder-friendly measures. This is interpreted as choosing a win-win strategy that pursues mutual benefits through reasonable stock price support measures rather than a wasteful dispute.

According to the investment banking (IB) industry on the 4th, RemonRain is currently negotiating with P&I on shareholder-friendly measures to boost the stock price, which was damaged by a third-party allotment capital increase. It is known that they are engaged in a tug-of-war over the methods and scale of stock price support, such as share buybacks, cash and stock dividends, and bonus shares. An industry insider said, "It seems that P&I agreed to step back from shareholder proposals, including lawsuits for inspection of accounting books and auditor appointments, on the condition that RemonRain presents shareholder-friendly measures," adding, "I understand that they are negotiating the details of the shareholder-friendly measures."

[Image source=Yonhap News]

In January, P&I raised doubts about the appropriateness and necessity of RemonRain’s third-party allotment capital increase and filed a lawsuit for inspection and copying of accounting books. After filing the lawsuit, they publicly declared at the March regular shareholders’ meeting that they would propose shareholder proposals such as auditor appointments. Although their shareholding is small, they were confident of winning if they gained support from general shareholders because the voting rights of major shareholders are limited to 3% on auditor appointment agendas.

In December last year, RemonRain conducted a paid-in capital increase by issuing convertible preferred shares (CPS) worth 9 billion KRW to major shareholders. Regarding this, P&I pointed out that the CPS issued by RemonRain was designed to cause harm (dilution of shares) to minority shareholders while allowing major shareholders to expand control over the company under very favorable conditions. The issuance conditions, such as a large discount rate applied to the CPS issuance, the possibility of repricing the conversion price only when the stock price falls, and the granting of put options on 30% of the CPS issuance volume, were cited as preferential treatment for major shareholders.

P&I also questioned the managerial necessity, arguing that RemonRain’s cash liquidity situation was not bad enough to urgently conduct a paid-in capital increase under abnormal conditions. They cited that RemonRain recorded operating and net profits for the past three years, raised a large amount of public offering funds during its transfer listing from KONEX to KOSDAQ in 2021, and that sufficient cash inflow was expected due to the recent huge success of the drama ‘The Youngest Son of a Conglomerate Family.’ They also analyzed that RemonRain’s short-term borrowings were only 5.6 billion KRW, so the burden of debt repayment was not significant.

RemonRain responded by saying, "P&I’s claims of major shareholder favoritism and unnecessary capital increase are not true," and announced legal action. They maintained the position that the capital increase was necessary to secure new intellectual property (IP) and improve financial stability.

Both sides, which seemed likely to escalate into a fierce dispute, reportedly began mutual agreement talks after mid-February. RemonRain explained that they reached an agreement to persuade the necessity of the capital increase through active dialogue and communication with shareholders including P&I.

The detailed contents of the shareholder-friendly measures have not been finalized yet. An industry insider predicted, "Depending on the contents of the stock price support measures, some can be finalized at this shareholders’ meeting immediately, while others may require prior amendments to the articles of incorporation, so the stock price support plan may proceed sequentially according to the procedures."