'Cellid' Conducts Another Capital Increase Less Than a Year After Previous One [Reporter Reading Securities Registration Statement]

CEO Kang Chang-yul participates with only 30% of allocated shares... Stake drops to 11% after rights offering
55% of total issued shares newly issued... Concerns over stock dilution

Bio company Cellid is conducting a rights offering again in less than a year. Last year, Cellid aimed to raise 40 billion KRW but secured less than half of the target amount due to a decrease in the issue price. In a way, this rights offering can be seen as inevitable. Meanwhile, the largest shareholder plans to participate in only a portion, not all, of the allocated shares, just like in the previous rights offering.

According to the Financial Supervisory Service's electronic disclosure system on the 31st, Cellid will conduct a rights offering through a shareholder allocation followed by a general public offering of unsubscribed shares. The company plans to raise a total of 17.5 billion KRW. The newly issued shares amount to 7.5 million, with a planned issue price of 2,335 KRW per share.

Cellid attempted to raise 40 billion KRW in June last year. However, as the stock price continued to decline, the rights offering completed in September only managed to raise 17.5 billion KRW. This rights offering appears to be an unavoidable choice for Cellid.

Reviewing the securities registration statement from last year's rights offering, it was explained that "if the need for additional fundraising continues after the rights offering, Cellid's liquidity could significantly deteriorate, and additional fundraising may be conducted."

Cellid recorded zero sales last year. This was because the contract manufacturing sales that occurred in 2022 were completely absent last year. As of the first quarter of this year, the company recorded sales of 315 million KRW. Notably, during the five-year grace period after its technical special listing in 2019, Cellid failed to generate proper performance. According to the securities registration statement at the time of listing, Cellid expected to achieve sales of 42.6 billion KRW in 2022 and 79.9 billion KRW in 2023.

Due to the lack of sales from technology exports and other sources, Cellid merged with a bakery company to generate sales. On March 12 of this year, Cellid acquired 100% of the shares of a company called Pobaker by spending 500 million KRW and merged it. Pobaker recorded sales of 5.577 billion KRW and an operating loss of 625 million KRW last year. In the first quarter of this year, it achieved sales of 748 million KRW and an operating profit of 78 million KRW.

This move is interpreted as an effort to avoid being designated as a KOSDAQ management item. Generally, KOSDAQ-listed companies are designated as management items if their pre-tax continuing business losses exceed 50% of equity twice or more in the last three years, or if their sales in the most recent fiscal year fall below 3 billion KRW.

Along with this, there is concern about the weakening of the largest shareholder's control. Currently, Cellid's largest shareholder, CEO Kang Chang-yul, holds a 15.0% stake, and including related parties, the total is 21%. In this rights offering, CEO Kang plans to subscribe to more than 30% of his allocated shares. If he subscribes to exactly 30%, his stake will fall to 11.3% after the rights offering. Last year, he participated with a limit of 700 million KRW.

Share dilution is also expected after the rights offering. The shares to be issued this time correspond to 55.1% of the total shares (13,602,977 shares). More than half of the total shares will be issued.

Meanwhile, Cellid plans to use all the funds raised through this rights offering for research and development (R&D). It will invest 13.9 billion KRW in conducting and analyzing Phase 3 clinical trials of the Omicron-targeted COVID-19 vaccine 'AdCLD-CoV19-1 OMI.' Additionally, 3.55 billion KRW will be used to prepare for Phase 2b/3 clinical trials of the human papillomavirus anticancer immunotherapy vaccine 'BVAC-C,' and 1.2 billion KRW will be allocated for clinical development of the head and neck cancer autologous cell therapy 'BVAC-E6E7.'