[Funding] Kkumbi Increases Capital After 4 Months Due to Land Price Rise

Kkumbi Listed on KOSDAQ in February Needs Additional Funds for Factory Establishment
Initial Plan Changed Due to Insufficient IPO Proceeds
Rights Offering Without Detailed Explanation... Growing Shareholder Dissatisfaction

Kkumbee, which was listed on the KOSDAQ market in February this year, has launched a large-scale fundraising effort to establish a new factory. Among various fundraising methods, the company chose a public offering rights issue, creating a variable that could affect its stock price.

According to the Financial Supervisory Service, Kkumbee will raise 20.2 billion KRW by issuing 1.5 million new shares. The planned issue price per share is 13,460 KRW, with the final issue price to be confirmed on the 14th.

The raised funds will be used to build the new factory. Including land and construction costs, a total of 21 billion KRW is expected to be spent. Of the funds raised through the rights issue, 13.2 billion KRW will be used for factory establishment, and the remaining funds will be used as operating capital for purchasing raw materials and outsourcing processing costs. Any shortfall in funding for the factory establishment will be covered by the funds raised during the initial public offering (IPO).

The company explained that as sales of its main products, including baby mats, have grown, it decided to build a factory to secure cost and quality competitiveness and reduce logistics costs. Establishing the factory is expected to improve profitability not only by reducing costs but also by securing logistics warehouse space and reducing inventory burden.

With increased sales of key products, the need to own direct production facilities has grown, making this fundraising effort a promising sign of Kkumbee’s growth. However, some shareholders have expressed dissatisfaction due to insufficient explanations regarding the large-scale fundraising just four months after the IPO.

Before listing in February this year, Kkumbee explained that the funds raised would be used to build a factory. According to the explanation at that time, the factory construction was planned as early as August 2020. In June 2021, a comprehensive factory construction report was prepared, and from March to September 2022, the factory site was reviewed. The company announced plans to sign the contract by the end of February this year and pay the balance by March. Kkumbee was listed as scheduled and set the public offering price at 5,000 KRW, exceeding the initially proposed range of 4,000 to 4,500 KRW. There were no variables during the listing process that would have changed the factory establishment plan.

According to the securities registration statement submitted by Kkumbee for the public offering rights issue, the company changed its business plan to purchase land in Anseong, Gyeonggi Province, instead of the originally planned land in Buk-ri, Namsa-eup, Yongin City, due to a significant increase in the land price. On March 30, Kkumbee signed a land purchase contract in Anseong instead of Yongin. It appears that the company initially intended to purchase land in Yongin immediately after listing but sought an alternative site due to price disagreements. This means the plan, which had been prepared for over a year, was changed within two months.

Regardless of the plan disruption, Kkumbee’s stock price surged after listing. On March 27, just two months later, it reached 35,450 KRW, about seven times the public offering price. In the first quarter of this year, Kkumbee recorded sales of 6.86166 billion KRW and an operating loss of 1.19906 billion KRW. This was a decline compared to sales of 6.82078 billion KRW and an operating profit of 659.5 million KRW in the first quarter of last year. The stock price appears to have been influenced more by expectations that the company would grow by leveraging the funds raised through the IPO rather than by improvements in performance.

Kkumbee is a company that sells baby products such as infant furniture, baby mats, and skincare products under the corporate philosophy of "Everyday Inspiration, a Company That Grows with Parenting." Given the importance of brand trust in baby products, shareholders who believed in the business plans disclosed during the IPO are pointing out that the company needs to provide sufficient explanations for conducting a rights issue just four months after the IPO.