Exercise Price of Warrants at 19,600 KRW... Expecting 20% Profit
702.41% Increase Compared to End of Last Month Following Change of Major Shareholder
Wider Planet's first tranche of convertible bonds with warrants (BW) investors are breathing a sigh of relief. After the BW issuance, the stock price had been falling continuously, making it difficult to exercise the warrants, but the stock price surged sharply following news of actors Lee Jung-jae and Jung Woo-sung's company acquisition. Since the exercise price of the first tranche BW warrants has risen to nearly 20% above the current stock price, investors are expected to gain substantial profits.
According to the Financial Supervisory Service's electronic disclosure system on the 22nd, Wider Planet announced that 71,428 shares of the first tranche BW will be listed on January 4 next year. The exercise amount is 1.4 billion KRW, and the warrant exercise price is 19,600 KRW. Given that Wider Planet's closing price on the 21st was 23,350 KRW, if the stock price maintains the current level until next year, a return of 19.13% is expected.
Wider Planet issued the first tranche BW worth 16 billion KRW in August 2021. BW is a convertible bond that includes a warrant, which is the right to subscribe to new shares of the issuing company. Investors can aim for profits from stock conversion gains, equity acquisition, and warrant trading gains.
Wider Planet planned to use the funds to build an AI and big data platform-based B2C (business-to-consumer) service platform and develop new business models. Both the nominal and maturity interest rates are 0.0%. Major investors in the BW include Chorokbaem Media and Samsung Securities, each investing 5 billion KRW for a total of 10 billion KRW, and the Industrial Bank of Korea investing 2 billion KRW.
Despite the exercise period for the first tranche BW starting on February 25, investors did not expect to exercise the warrants. This was because the stock price, which was in the 24,000 KRW range at the time of BW issuance, continuously slid down to as low as 2,910 KRW by the end of last month. Especially since the exercise price was adjusted in November 2021 from 24,500 KRW to the minimum adjusted price limit of 19,600 KRW, no further adjustments were expected.
The main reason for the stock price decline was the persistently poor performance. Wider Planet entered the KOSDAQ in February 2021 under the special technology growth company status. It is a marketing platform company operating 'Targeting Gates,' an automated programmatic marketing service platform based on big data analysis and AI.
In 2021, it recorded sales of 35.421 billion KRW and an operating loss of 5.476 billion KRW. This was far below the forecasted operating profit of 840 million KRW. The same was true last year. The forecasted sales and operating profit were 46.336 billion KRW and 6.969 billion KRW, respectively. However, actual sales were 35.76 billion KRW, with an operating loss of 6.036 billion KRW. As of the cumulative third quarter this year, sales were 16.5 billion KRW, with an operating loss of 2 billion KRW.
However, the stock price surged sharply recently following a change in the largest shareholder. On the 8th, Wider Planet announced a third-party allotment capital increase of about 19 billion KRW to raise operating funds. The capital increase participants included Lee Jung-jae, Jung Woo-sung, and six others including Wysiwyg Studios.
In particular, the stock price rally was ignited when a photo was released showing Lee Jung-jae posing with Han Dong-hoon, the Minister of Justice, who had tendered his resignation and held a farewell ceremony the day before. Starting from the 8th, the stock hit the upper price limit for seven consecutive days until the 20th. Although the upper limit streak ended on the 21st, the closing price on the 21st was up 528.53% compared to 3,715 KRW on the 7th. Compared to the end of last month, it rose by 702.41%.
Given the recent sharp rise in stock price, BW investors are highly likely to exercise additional warrants. After this exercise, the remaining balance of the first tranche BW will be 14.6 billion KRW, with 744,898 shares available for exercise.
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