[At a Crossroads: Sorux②] Although for shareholder liquidity, the CEO gains valuation profit

600 Billion to 1.8 Trillion, Large Valuation Gains from Backdoor Listing
Stock Price Rose Thanks to Aribio... But Small Shareholders Left Out

Last year, Jeong Jae-jun, CEO of Aribio, who acquired Solux using his own Aribio shares, reportedly gained an estimated valuation profit of about 120 billion KRW within a year. This means his initial investment has more than tripled. In contrast, other Aribio shareholders are analyzed to gain only about 17% profit over the same period if the merger is completed.

According to the Financial Supervisory Service's electronic disclosure system on the 21st, Solux announced that it will absorb and merge with Aribio. The merger ratio is 1 to 2.5 shares. For each Aribio share, 2.5 new Solux shares will be issued. The per-share price based on the merger ratio is 11,262 KRW for Solux and 28,192 KRW for Aribio. This means existing Aribio shareholders will effectively buy Solux shares at 11,262 KRW each.

On the other hand, Jeong Jae-jun, who acquired Solux last year, obtained Solux shares at a much lower price of about 3,846 KRW per share compared to current shareholders.

On June 30 last year, CEO Jeong acquired 1 million shares (12.11%) and management rights from former largest shareholder Kim Bok-deok for 30 billion KRW. Along with this, Jeong injected 10 billion KRW through a paid-in capital increase and 20 billion KRW via bonds with warrants (BW) into Solux.

In total, he acquired a 41.74% stake in Solux for 60 billion KRW. Based on Solux's stock price at that time, Jeong's average acquisition cost was 11,539 KRW per share. After subsequent bonus stock issues and reverse stock splits, the average cost adjusted to the current stock price level is 3,846 KRW per share.

Jeong did not pay the entire 60 billion KRW in cash. Immediately after securing management rights of Solux on June 30 last year, he sold 943,254 of his own Aribio shares to Solux at 24,000 KRW per share, totaling 22.6 billion KRW. The funds he had injected into Solux through capital increase and BW flowed back to him.

Furthermore, on July 7 last year, he transferred an additional 168,546 shares of his own stock to Solux for 4 billion KRW, and on December 28, he sold another 500,000 shares for 12.8 billion KRW. Essentially, he acquired Solux shares using Aribio shares.

Through these transactions, CEO Jeong was able to recover 39.4 billion KRW without losing management control of Aribio. The remaining 20.6 billion KRW was mostly borrowed through stock-secured loans from Meritz Securities and others, so the actual cash Jeong invested is estimated to be around 4.6 billion KRW.

The value of the stake secured by CEO Jeong is currently 175.7 billion KRW based on the merger price. The initial 60 billion KRW investment increased by 193% in just over a year. Meanwhile, existing Aribio shareholders are expected to gain about 17% profit from this merger, calculated based on the 24,000 KRW per share price when Jeong sold his stake in Solux last year.

As a result, the market criticizes that CEO Jeong monopolized the profits from Aribio's backdoor listing. In fact, Solux's stock price surged more than ninefold in a year solely due to the Aribio issue, despite its own business performance being sluggish. Also, shareholder value-enhancing actions such as a 1 to 14 bonus stock issue benefited only Solux shareholders including CEO Jeong, excluding Aribio shareholders.

In response, a Solux representative explained, "Aribio failed three rounds of technology evaluations, so direct listing and NASDAQ listing were expected to take a long time. Therefore, to enable shareholders to quickly liquidate their investment stakes, the acquisition and merger with Solux were decided."

They added, "Although it appears that CEO Jeong gained profits due to the rise in Solux's stock price, he has not actually sold his shares. After the merger, we will accelerate clinical trials and new business development to create an environment that can realize an increase in Solux's corporate value."

Meanwhile, Aribio is a drug development company. Its main pipeline, the oral dementia treatment drug 'AR1001,' is undergoing global Phase 3 clinical trials. The record date for shareholders for the merger general meeting is September 26, and the meeting will be held on September 27. Objections to the merger will be accepted from September 12 to 26. The stock purchase request prices are 10,719 KRW for Solux and 28,192 KRW for Aribio.