[At the Crossroads of Listed Companies] A.TOM④ Considering Issuance of 10 Billion KRW Scale CB... Increasing Concerns Over Stock Dilution

Up to 30% of Total Shares Could Flood the Market
Attention on Shareholders' Meeting Vote for Raising CB Issuance Limit

KOSDAQ-listed company A-TOM has been revealed to be considering the issuance of a large-scale convertible bond (CB). Since its listing in December last year, the stock price has fallen by more than half due to controversies over the overvaluation of the public offering price, raising concerns that existing shareholders could face dilution risks if CBs are issued at this stock price.

According to the investment banking (IB) industry on the 26th, A-TOM is reportedly specifically reviewing the issuance of CBs worth 10 billion KRW. The conditions under consideration include a maturity of 3 years, a nominal interest rate of 0%, a maturity interest rate of 3%, and the option to request conversion from one year after issuance until maturity.

Put option and call option conditions have also been detailed. For the put option, it can be exercised every three months starting 18 months after issuance. The call option allows exercising 30% of the total CBs monthly from 12 months to 24 months after issuance. This structure enables certain individuals to secure profits by utilizing the call option in the future. The limit for conversion price adjustment (refixing) is also planned at 70%.

A-TOM had previously submitted an agenda to increase the issuance limits for CBs and bonds with warrants (BW) at the regular shareholders' meeting scheduled for the 30th. The proposal is to amend the articles of incorporation to allow issuance of CBs and BWs up to 30 billion KRW and 10 billion KRW respectively, up from the previous limit of 5 billion KRW each. If the agenda passes at the shareholders' meeting, it is estimated that CBs will be issued under the aforementioned conditions in the near future.

Earlier, A-TOM stated that the reason for expanding the CB issuance limit at this shareholders' meeting was “because the existing articles of incorporation set a low issuance limit, and this is a proactive increase of the limit amount; however, no CB or BW issuance has been confirmed at this time.” Nevertheless, they had prepared specific conditions and were readying for CB issuance.

If A-TOM issues CBs worth 10 billion KRW at the current market capitalization level, the stock price could be significantly diluted. Recently, A-TOM’s stock price has been hovering around 8,400 KRW. If the conversion price of the CB is set at this level, approximately 1.19 million new shares could be issued. If the stock price falls further and a refixing occurs, more than 30% of A-TOM’s total shares could be newly issued.

Therefore, there is keen interest in whether the agenda to expand the CB issuance limit will pass at this shareholders' meeting. In particular, it is crucial whether institutional and small shareholders who invested near the public offering price when A-TOM was listed on the KOSDAQ in December last year will support the agenda.

A-TOM was listed on the KOSDAQ at a public offering price of 18,000 KRW using a technology special case method. However, it recorded a large deficit, showing a significant gap from the performance forecasts presented at the time, leading to controversy over a “puffed-up listing,” and the current stock price has halved.

Regarding this, an A-TOM official stated, “We only said that nothing has been finalized regarding CB issuance, not that it has not been reviewed.”