After Listing, Two CB Issuances and Three Rights Offerings... Plasmapp Stock Price Dilution

Entered KOSDAQ in 2022... Raised 25.5 Billion KRW After Listing
10% Increase in Shares Through Rights Offering... "Up to 25% of Total Can Be Released Upon CB Conversion"

Since Plasmap's listing on the KOSDAQ, concerns over stock dilution have increased as the company has raised funds a total of five times. The total number of shares has already increased by more than 10% compared to immediately after the listing due to paid-in capital increases. Additionally, due to the stock price decline, the conversion prices of the 1st, 2nd, and 3rd convertible bonds (CBs) have dropped to their lowest levels, increasing the number of shares that can be converted. If converted into shares, this will not only dilute the stock price but also raise concerns about overhang (potential sell-off volume).

According to the financial investment industry on the 24th, Plasmap entered the KOSDAQ market through a technology special listing in October 2022 and subsequently issued CBs twice and conducted three paid-in capital increases.

In January 2023, Plasmap conducted a paid-in capital increase worth 3 billion KRW targeting Dreamtech. It also decided to issue 12 billion KRW worth of 2nd CBs. At that time, Plasmap raised the funds to be used for operating and facility expenses. The coupon rate and maturity interest rate of the CBs were 0.0% and 3.0%, respectively.

Less than a year later, Plasmap conducted another paid-in capital increase. In June of the same year, it raised 5.5 billion KRW through a third-party allotment paid-in capital increase targeting 40 people, including CEO Lim Yubong, the largest shareholder. Then, in December of the same year, it again conducted the 3rd CB issuance and a third-party allotment paid-in capital increase. It raised 3 billion KRW through a paid-in capital increase targeting Dreamtech and issued 2 billion KRW worth of CBs targeting L&C Bio.

The total funds raised after listing amount to 25.5 billion KRW. This is more than twice the 12.4 billion KRW secured through the initial public offering (IPO). Especially due to frequent fundraising, the number of Plasmap’s shares increased from 17,716,898 shares at the end of 2022 to 20,346,667 shares. This is a 14.21% increase in just over a year after listing.

The remaining CBs are also problematic. On the 22nd of this month, Plasmap disclosed that the conversion price of the 1st CB dropped from 3,606 KRW to 2,682 KRW, and the number of shares that can be issued increased from 1,247,920 shares to 1,690,458 shares. For the 2nd CB, the conversion price fell from 6,410 KRW to 4,487 KRW, and the number of shares increased from 1,872,074 shares to 2,674,392 shares. The 3rd CB’s conversion price dropped from 4,080 KRW to 2,860 KRW, with the number of shares that can be issued reaching 699,300 shares. In total, 5,064,150 shares, accounting for 25.03% of the total shares, can be converted into stock.

In particular, besides overhang concerns, there is also the possibility of redemption. For the 1st CB, the conversion request period is from July 15, 2021, to June 14 of this year. The 2nd CB is even more burdensome. The conversion price of the 2nd CB has fallen to the minimum level. On the 23rd, Plasmap’s closing price was 2,590 KRW. Although there is still time until the maturity date of January 30, 2028, the nearly twofold difference in price inevitably poses a burden. As of the end of last year, Plasmap’s cash and cash equivalents (including short-term financial products) amounted to only 7.5 billion KRW.

Plasmap is a bio-plasma deep-tech company that started in 2015 at the KAIST Department of Physics Plasma Laboratory. Using bio-plasma technology, it is developing medical device care solutions, starting with low-temperature sterilization solutions for surgical instruments and implant reactivation solutions. Last year, sales amounted to 12.917 billion KRW, a 2.92% decrease compared to the same period the previous year. Operating losses continued with a loss of 20.6 billion KRW. This performance falls short of the forecasted sales of 40 billion KRW and operating profit of 243 million KRW presented at the time of the IPO.