[At the Crossroads of Listed Companies] Ateam② Despite Deficits, Director Salary Cap Doubled... CB and BW Also Expanded

Director Remuneration Limit Increased from 5 Billion to 10 Billion
CB·BW Raised from 10 Billion to 40 Billion

Atom, a KOSDAQ-listed company that recorded a large-scale deficit last year, is pushing to increase the compensation limit for its CEO and other executives. It also plans to significantly expand the issuance limits for convertible bonds (CB) and bonds with warrants (BW), keeping the possibility of additional fundraising open.

According to the Financial Supervisory Service's electronic disclosure system on the 24th, Atom, a company with a fiscal year ending in June, is scheduled to hold its regular shareholders' meeting on the 30th. Atom has proposed an agenda at this shareholders' meeting to double the total compensation limit for directors from the current 500 million KRW to 1 billion KRW. Atom's registered directors include CEO Han Taek-su, Director Lim Seong-gi, both inside directors, and Shin Dong-myeong, an outside director. As of last year, the outside director's annual salary was 6 million KRW. In practice, CEO Han and Director Lim receive most of the registered directors' compensation.

Atom is currently continuing to incur large-scale losses. Atom is a company that manufactures transformers used in portable electronic device chargers and TVs. It also operates a subsidiary engaged in the simple distribution business of multilayer ceramic capacitors (MLCC). For the fiscal year 2023 (July 2023 to June 2024), Atom reported consolidated sales of 38.5 billion KRW, an operating loss of 4.1 billion KRW, and a net loss of 4.7 billion KRW. Sales decreased by 19% compared to the previous year, and losses persisted.

In particular, Atom's performance showed a significant gap compared to the results presented at its listing in December last year. Atom was listed on the KOSDAQ through a technology special listing. Technology special listing companies can go public based on future value assessments even if they are currently operating at a loss. Atom had recorded net losses ranging from 5.8 billion KRW to 20.5 billion KRW over the four years prior to listing.

Atom succeeded in going public by presenting a rosy forecast of 53.8 billion KRW in sales and 700 million KRW in operating profit for 2023 after listing. However, actual sales were 28% lower than the forecast, and it failed to generate operating profit.

Due to poor performance, the stock price has also remained well below the initial public offering price. Atom's IPO price was 18,000 KRW, but as of the previous day, the stock price hovered around 8,400 KRW. In this situation, the company is attempting only to increase the compensation limit for management.

Additionally, Atom plans to expand the issuance limits for CB and BW at this shareholders' meeting. Under the current articles of incorporation, Atom can issue up to 5 billion KRW each of CB and BW by board resolution. If the agenda passes at this meeting, the issuance limits for CB and BW will be raised to 30 billion KRW and 10 billion KRW, respectively.

CB and BW are classified as borrowings once issued. Currently, Atom's consolidated total liabilities amount to 25.5 billion KRW, and total equity is 15.4 billion KRW. If CB and BW are issued up to the new limits, the debt ratio would rise from the current 166% to over 400%. Furthermore, if these CB and BW are converted into shares in the future, the volume would be proportional to Atom's current market capitalization (45.3 billion KRW as of the previous day's closing price), raising concerns about significant stock dilution.

Regarding this, an Atom representative stated, "We are only increasing the compensation limit for directors at the shareholders' meeting, and there are no plans to raise the actual compensation of registered executives." They added, "The issuance limits for CB and BW were set low, so we proactively raised the limits, but no issuance has been finalized."