Former Outside Director Who Sold Company to SP Soft Earns 2.5 Times Profit in One Month

YooHost Weekly Price from 16,500 KRW to 40,858 KRW
SPSoft New Shares 7.9%... Family Shareholders 'Big Hit'

SPSoft, a KOSDAQ-listed company, has acquired ‘UHost,’ a company previously owned by former outside director Lee Yoon-seok. Lee resigned from his outside director position last month ahead of the company’s sale. Shortly after, he transferred UHost shares to his family members at 16,500 KRW per share, and less than a month later, the family sold the shares to SPSoft at a price approximately 2.5 times higher, resulting in significant profits for the family.

According to the Financial Supervisory Service’s electronic disclosure system on the 18th, SPSoft announced that it will acquire 100% of UHost’s shares through a stock exchange. SPSoft will acquire 709,093 shares of UHost and distribute 1,668,004 new shares of SPSoft to existing UHost shareholders. Approximately 7.9% of new shares will be issued relative to the existing shares. The exchange ratio between SPSoft shares and UHost shares is 1 to 2.352 shares.

SPSoft is a distributor of Microsoft (MS) external user licenses (SPLA). It supplies server operating systems (OS) and database (DB) management programs necessary for operating servers and databases. It also operates businesses in cloud services and copyright protection solutions.

An SPSoft representative stated, “UHost is a cloud management service provider (MSP) specialized in Microsoft Azure. Through this acquisition, SPSoft’s performance growth momentum will be further strengthened, and various synergies in the cloud sector are expected.”

SPSoft valued UHost at 29 billion KRW, which equates to 40,858 KRW per share. This price was calculated by taking the weighted arithmetic average of the current asset value of 10.5 billion KRW and the estimated future earnings value of 61.1 billion KRW.

As of the end of last year, UHost had total assets of 11 billion KRW, total liabilities of 4.4 billion KRW, and total equity of 6.6 billion KRW. It recorded sales of 19.2 billion KRW, operating profit of 1 billion KRW, and net profit of 1 billion KRW. While sales increased by 50% compared to the previous year, operating profit decreased by 33.2%, and net profit also declined by 26%.

The reason for the decline in profits despite increased sales is the sharp rise in the cost of sales related to UHost’s main business, cloud services. Between 2021 and 2022, UHost’s cost of sales ratio remained in the 50% range but surged to approximately 85.6% last year.

Nevertheless, SPSoft estimates that UHost’s operating profit will reach 1.3 billion KRW next year and increase to about 4.2 billion KRW by 2028. Sales are also expected to surpass the 20 billion KRW mark, which it has not exceeded in the past three years, and reach 35.2 billion KRW by 2028. Based on these performance estimates, UHost’s earnings value was evaluated at 61.1 billion KRW.

An SPSoft representative explained, “Existing cloud MSP sales are on an upward trend, and the number of large customers with high demand is increasing. Smart factory sales are also expected to have more new clients than existing ones by 2026.”

The acquisition structure of UHost means that the higher the company’s valuation, the more SPSoft shares existing UHost shareholders receive.

The largest shareholder and CEO of UHost is Lee Yoon-seok, former outside director of SPSoft. Lee voluntarily resigned from SPSoft on the 16th of last month for personal reasons. He was appointed as an outside director of SPSoft in June 2022 and served as the chairman of the company’s transparent management committee until last month.

After resigning, Lee transferred 48,450 shares of UHost to his spouse and two children on the 21st of last month. The transaction price per share was 16,500 KRW. At that time, the value of UHost shares was based on the stock valuation amount under the Inheritance and Gift Tax Act, which is used for valuing unlisted companies.

Lee’s family members purchased the shares at 16,500 KRW per share and, in less than a month, the shares were valued at 40,858 KRW per share. The shares bought for a total of 800 million KRW are expected to increase in value to 2 billion KRW, representing a return of approximately 150%.

Regarding this, an SPSoft representative said, “Lee Yoon-seok resigned as soon as acquisition discussions began to ensure fair transactions and decision-making. Transactions between family members must be evaluated under the Inheritance and Gift Tax Act, which cannot reflect a company’s growth potential and future value, whereas corporate valuation under the Capital Markets Act does reflect these factors, hence the difference in transaction amounts.”