Dasan Solueta CB Conversion Rush... Still 30 Billion Won Left

Awaiting Large-Scale Conversion of 60% Total Shares in CB
Cash Assets Depleted... Repayment Difficult Due to Deficit

Conversion requests for convertible bonds (CB) of Dasan Solueta, a KOSDAQ-listed company, are continuing. This is analyzed to be due to the stock price, which had been below the conversion price, recently showing a slight upward trend. However, since the unconverted CB still accounts for about 60% of the current market capitalization, it seems difficult to avoid the overhang (potential waiting supply) issue.

Screenshot of Dasan Solueta homepage.

According to the Financial Supervisory Service's electronic disclosure, Dasan Solueta announced on the 12th that conversion requests were made for 800 million KRW of the 5th series CB and 2 billion KRW of the 7th series CB. Accordingly, a total of 938,263 shares are scheduled to be listed on August 2. This volume corresponds to 5.52% of the total issued shares.

The full-scale CB conversion at Dasan Solueta began in December last year. In December, Dasan Solueta disclosed that conversion requests were made for 900 million KRW of the 4th series CB and 2.8 billion KRW of the 5th series CB. The number of converted shares was a large volume of 1,488,933 shares (10.77%).

The convertible date for these CBs was from 2021, but as the stock price remained sluggish, conversion was delayed and is analyzed to have been requested at that time. The conversion price of these CBs was 2,485 KRW, and the stock price on the request day was in the 2,780 KRW range. Although it was not a level to expect large profits, investors chose conversion in exchange for receiving a 1% maturity interest.

Subsequently, from May, conversion requests were made consecutively for 1 billion KRW of the 9th series CB, 2 billion KRW of the 5th series CB, and 1.5 billion KRW of the 9th series CB. The total number of converted shares was 1,697,682. This volume corresponds to about 11% of the total issued shares. From December last year to this month, about 25% of the total shares have been newly issued through CB conversion alone.

Despite such a large amount of CB being converted, even more volume remains. As of the 12th, Dasan Solueta still has 30.9 billion KRW worth of unconverted CB. In terms of shares, this amounts to 10,812,204 shares. This volume exceeds 60% of the total issued shares.

The conversion prices of these CBs are 2,800 KRW and 3,245 KRW. The conversion period has already started since last year. If the stock price shows an upward trend, conversion requests are expected. This is because Dasan Solueta is currently not in a position to repay these CBs.

Dasan Solueta is a company engaged in the manufacturing and sales of electromagnetic wave shielding materials and automotive parts. As of the end of Q1 this year, it recorded sales of 37 billion KRW, an operating loss of 1.4 billion KRW, and a net loss of 3.3 billion KRW. Compared to the same period last year, sales increased by 4.4%, but operating profit turned to a loss, and net loss increased by 147%.

Dasan Solueta's cash equivalents amount to only 1.7 billion KRW. Although long-term investment assets and investments in affiliates and subsidiaries total about 58 billion KRW, all are in a loss state compared to acquisition cost. Also, most are pledged as collateral for convertible bonds or borrowings from affiliates.

A financial investment industry official pointed out, “Since the CB volume is large, conversion requests are unlikely to occur all at once, but if the stock price rises, continuous conversion requests may occur.”