CB Conversion Requests Started Before Sale Announcement
Sudden Deficit After Listing... CEO Kogwangwon Sits on a Fortune
The stock price of B2N, a KOSDAQ-listed company, surged several days before the announcement of its sale. Around the same time, convertible bonds (CB) were also converted. As a result, a large volume of shares was released into the market, but CB investors were able to expect profits thanks to the rising stock price.
According to the Financial Supervisory Service's electronic disclosure, B2N announced that the second series of CBs worth 3.6 billion KRW were converted. Consequently, a total of 1,560,505 shares are scheduled to be newly listed on the 27th. This accounts for about 5% of the total number of shares.
The second series of CBs was issued in February last year with a scale of 9 billion KRW. The initial issuer was Kiwoom Securities. It is currently estimated that other investors hold the CBs. The conversion price of these CBs is 2,355 KRW. Although conversion was possible starting from February, one year after issuance, B2N’s stock price hovered around the conversion price, preventing conversion until now.
The first conversion request for the CBs was made on the 10th. B2N’s stock price, which had been moving between 2,100 and 2,300 KRW for several months, began to surge from the 7th. On that day alone, the stock price soared more than 26% intraday. Since there were no special news or issues, the reason for the price increase remains unknown.
Afterwards, the stock price continued to rise sharply, surpassing 4,200 KRW intraday on the 13th. This represents nearly a doubling in five trading days. As the stock price rose, CB conversion requests were made consecutively on the 13th and 14th following the initial request on the 10th.
Amid the rapid stock price increase and CB conversions, B2N announced at 6:22 PM on the 13th that it had signed a stock transfer agreement involving a change of the largest shareholder. This meant a change in the company’s ownership and management rights. Typically, management rights sales are considered a factor that drives stock price increases due to expectations of new business opportunities.
As a result, suspicions have been raised in the market that information related to the management rights sale may have been leaked in advance. It is argued that if the sale issue had been reflected in the stock price, the price should have risen from the 14th, after the announcement.
This sale is a deal conducted about 1 year and 8 months after B2N’s listing. B2N was listed on the KOSDAQ market in November 2021 through a merger with SangSangInian No.1 Special Purpose Acquisition Company (SPAC). B2N primarily operates in big data and data consulting, as well as the development and sales of data solutions.
Before listing, in 2020, it was a solid company with sales of 24.9 billion KRW and operating profit of 3.4 billion KRW. Even after entering the KOSDAQ market in 2021, it maintained profitability with sales of 25.8 billion KRW and operating profit of 2.2 billion KRW.
However, last year, it suddenly recorded an operating loss of 2.2 billion KRW. Although sales slightly increased, selling and administrative expenses surged by more than 68%. In particular, the miscellaneous expenses within selling and administrative expenses, whose details are unknown, increased about eightfold from 250 million KRW in 2021 to 2 billion KRW last year.
This represents a significant discrepancy from the estimated performance used to calculate the merger ratio at the time of listing. At that time, B2N predicted sales of 38.1 billion KRW and operating profit of 3.7 billion KRW for 2022 in its securities registration statement. Based on this, the company’s value was assessed, and the merger ratio was calculated at 1 to 158. The higher B2N’s value, the more shares the largest shareholder, CEO Jo Gwang-won, would hold after listing. Through this listing, CEO Jo, who brought B2N public, has now liquidated over 30 billion KRW in cash through this sale.
Meanwhile, this management rights share transaction will be completed when the acquirer, B2N Acquisition Purpose First, pays 90% of the total sale amount as the remaining balance by three business days before the extraordinary general meeting scheduled for August 29.
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