Conversion Price 45,142 Won... Closing Price on 5th 37,650 Won
Favorable to Company at Conversion and Maturity... "Stock Price Direction is Important"
The conversion price of the 3rd and 4th series convertible bonds (CB) worth 60 billion KRW issued by Top Material last year is currently below the stock price. As of the first half of this year, Top Material's cash and cash equivalents amount to approximately 20 billion KRW. Since there is still a significant period until the CB conversion and maturity dates, the direction of the stock price is expected to become increasingly important.
According to the Financial Supervisory Service's electronic disclosure system on the 6th, Top Material recently announced that the conversion price of the 4th and 5th series CBs has been lowered from 64,488 KRW to 45,142 KRW.
Top Material is a company specializing in secondary battery system engineering. Secondary battery system engineering refers to a comprehensive solution covering all processes from the basic factory layout design, equipment placement and supply, to test operation and management, essential for establishing secondary battery production plants.
The company issued a total of 60 billion KRW worth of 4th and 5th series CBs last October, amounting to 42 billion KRW and 18 billion KRW respectively, to produce lithium iron phosphate (LFP) cathode materials.
The 4th series has a maturity and nominal interest rate of 0%, with the conversion request period from November 1, this year, to October 24, 2028. The bond maturity date is October 31, 2028. Investors earn profits solely through capital gains from stock price appreciation without interest income.
The 5th series CB is a perpetual bond. The nominal and maturity interest rates are both 1%. The conversion request period is from November 1, this year, to October 27, 2053. The maturity date is October 31, 2053. Compared to typical mezzanine bonds, perpetual bonds have relatively lower interest rates and are recognized as equity rather than debt, which can improve the financial structure.
Both the 4th and 5th series are structured favorably for the company. For the 4th series, the early redemption right begins 42 months after issuance. For the 5th series, the nominal interest rate increases to 8% starting five years after issuance. Subsequently, on each anniversary, the rate is adjusted by adding 4 percentage points to the previous year's rate.
With a long period remaining until maturity and conversion, the future direction of the stock price is becoming crucial. Top Material's stock price rose to as high as 98,600 KRW intraday in February this year. However, the closing price on the 5th of this month was 37,650 KRW, representing a halving compared to this year's intraday peak.
The main reasons for the stock price decline are poor earnings performance and a downturn in the industry, including reduced demand for electric vehicles. Sales in the first half of this year were 44.439778 billion KRW, with an operating loss of 586.17 million KRW. Sales decreased by 29.97% compared to the same period last year, and operating profit turned negative. Cash and cash equivalents stand at 20 billion KRW.
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