[At a Crossroads: Saltwear②] Sharp Sales Drop After Listing... Suspicions of Earnings Inflation

KOSDAQ-listed company Saltware was found to have had its sales boosted by its underwriter Mirae Asset Securities before its listing. However, sales sharply dropped after the listing, and Saltware turned to a loss just four months after going public. Its stock price also fell to about half of the listing price.

According to the Financial Supervisory Service's electronic disclosure on the 26th, Saltware announced that it recorded consolidated sales of 40 billion KRW and operating profit of 1.2 billion KRW in 2021. Since its establishment in 2003, Saltware had never achieved sales exceeding 30 billion KRW, but in 2021, sales suddenly increased by more than 10 billion KRW compared to the previous year.

Saltware is a system integration (SI) specialized company engaged in building cloud systems for public institutions, universities, and enterprises, infrastructure construction and operation services, and providing enterprise portal solutions. Due to the nature of its business, it is difficult to rapidly increase sales significantly in a short period.

The sales increase in 2021 was thanks to client A. Saltware generated 6.9 billion KRW from client A, accounting for about 17.3% of total sales. This is the highest sales proportion from a single client for Saltware. The company did not disclose the client's name in its business report. Client A was responsible for about 2.8 billion KRW, or 9% of Saltware's sales, in 2020 as well.

However, sales to client A sharply dropped to about 500 million KRW last year, a decrease of approximately 92.5% compared to the previous year. Consequently, Saltware's total sales fell from 40 billion KRW to 31.3 billion KRW. The sharp decline in sales to client A pulled down the overall sales.

According to a corporate analysis report by Korea Evaluation Data, client A is identified as Mirae Asset Securities. Saltware stated in the evaluation report that among its major clients in 2021, the client accounting for 17% of sales was Mirae Asset Securities. In fact, the sales proportion of Mirae Asset Securities matches the sales proportion of client A, which Saltware anonymized in its business report.

Additionally, among Saltware's major clients is Korea Fund Partners, a former affiliate of Mirae Asset. Korea Fund Partners was previously Mirae Asset Fund Service. Although its largest shareholder changed to a private equity fund last year, Mirae Asset Consulting still holds a 30% stake, and until the end of 2021, Mirae Asset controlled the management rights.

In 2021, 4% of Saltware's total sales came from Korea Fund Partners. Combining the sales from Mirae Asset Securities and Korea Fund Partners, more than 21% of Saltware's total sales originated from Mirae Asset.

Despite Mirae Asset accounting for a large portion of Saltware's sales, it significantly reduced transactions with Saltware after its listing last year. Saltware was listed on the KOSDAQ market in August last year through a merger with Mirae Asset Daewoo SPAC No.3. In summary, Saltware, whose sales were boosted by Mirae Asset, merged with Mirae Asset SPAC to go public, and the following year, transactions between Mirae Asset and Saltware sharply decreased.

Due to the sharp sales decline, Saltware announced results that significantly deviated from the targets presented at the time of listing. Originally, Saltware projected sales of 47.1 billion KRW and operating profit of 2.6 billion KRW for last year. However, actual sales were 31.3 billion KRW, and it recorded an operating loss. As a result, Saltware's stock price also dropped to half of the initial listing price.

Meanwhile, attempts to contact Saltware and Mirae Asset Securities for inquiries about these matters were not answered.