Ice Cream Edu CB Lowered to Minimum Level... Overhang Concerns '↑'

Conversion price lowered from 3,822 won to 3,792 won, 'Minimum Limit'
"Up to 30% of total shares can be released to the market"

The conversion price of Ice Cream Edu's first tranche convertible bonds (CB) has dropped to the minimum limit just over a year after issuance, raising concerns about overhang (potential large-scale sell-off). Since the shares that can be issued exceed 30% of the total, it is expected that stock dilution will be unavoidable if these shares are released into the market.

According to the financial investment industry on the 18th, Ice Cream Edu recently announced that the conversion price of the first tranche CB was lowered from 3,822 won to 3,792 won. This adjustment was due to a decline in the market price.

This is the second time Ice Cream Edu has adjusted the conversion price. However, this adjustment has lowered the conversion price to the minimum limit. The reason is the continuously falling stock price. At the time of issuance in April last year, Ice Cream Edu's stock price was maintaining the 5,700 won range. However, due to poor performance such as turning to a deficit, the stock price continued to decline. The closing price on the 17th of this month was 3,495 won.

Last year, Ice Cream Edu issued CBs worth 16 billion won. The nominal interest rate is 0.0% with a maturity interest rate of 2.0%. Samsung Securities, KB Securities, Mirae Asset Securities, and Shinhan Investment Corp. participated in the CB. The company stated that the funds would be used for costs related to product competitiveness, portfolio expansion, and new business development.

With the conversion price lowered, the volume that could be released into the stock market has significantly increased. The volume, which was 2,953,664 shares at initial issuance, has increased to 4,219,409 shares due to this conversion price adjustment. This accounts for 32.80% of the total 12,864,037 shares. The conversion request period for the first tranche CB is from April 13, this year, to March 13, 2028. Since there is still sufficient time left, the future direction of the stock price has become important.

The problem lies in Ice Cream Edu's current performance. Last year, on a consolidated basis, the company recorded sales of 117.6 billion won and an operating loss of 16.7 billion won. Sales decreased by 12.13% compared to the previous year, and operating profit turned to a loss.

Over the past five years, the company has fluctuated between losses and profits, and its performance has not yet stabilized. In the first quarter of this year, sales were 27.5 billion won, down 12.46% year-on-year, and operating loss was 2.7 billion won. Although the deficit narrowed, losses continued. Cash and cash equivalents stand at only 5.6 billion won.

Ice Cream Edu was spun off from Sigong Media in April 2013 and is a company that develops and services the K-12 smart learning brand 'Ice Cream Home Run.' It entered the KOSDAQ market in 2019.