[At the Crossroads] Ecoglow ① Largest Shareholder's High-Interest Loan... Forced Sale Looms

If Stock Price Falls Below 747 Won, Margin Call Triggered
Limited Additional Collateral Capacity for Largest Shareholder

The stock price of Ecoglow, a KOSDAQ-listed company, has remained sluggish, raising the likelihood of a forced sale of shares pledged as collateral by its largest shareholder.

According to the Financial Supervisory Service's electronic disclosure system on August 27, the largest shareholder, The Pyeonhan, which holds 12,135,922 shares of Ecoglow (30.42%), has pledged 6 million shares (15%) as collateral and borrowed 2.8 billion won from SangSangin Savings Bank. The interest rate is 15%. This means The Pyeonhan pays 420 million won annually in interest alone.

The Pyeonhan first borrowed money from SangSangin Savings Bank on April 7. At that time, it pledged 6 million shares and received a 3 billion won stock-secured loan. After the three-month loan maturity, The Pyeonhan repaid 200 million won and extended the contract. However, the number of shares pledged as collateral remained unchanged. This is believed to be because Ecoglow's stock price, which was in the 1,000 won range at the time of the initial contract, had fallen to the 800 won range at the time of maturity extension.

The collateral ratio for this stock-secured loan is 160%. If the appraised value of the 6 million Ecoglow shares pledged as collateral falls below 4.48 billion won, additional collateral will be required or a forced sale will occur. This threshold corresponds to a share price of 747 won. As of the previous day, Ecoglow's stock was trading around 800 won. If the price falls by more than about 7%, it will breach the threshold.

The Pyeonhan, as the largest shareholder, has little capacity to provide additional collateral. This is because its remaining shares have already been pledged as collateral under other agreements. On January 22, Ecoglow issued convertible bonds (CB) worth 4 billion won, with SangSangin Savings Bank as the subscriber. At that time, The Pyeonhan, as a collateral provider, pledged 6 million shares as security. If SangSangin Savings Bank exercises its collateral rights for both the stock-secured loan and the CB guarantee, The Pyeonhan's stake would drop to 135,922 shares (0.34%).

It is also considered unlikely that The Pyeonhan can repay the debt in a lump sum. As of the end of last year, The Pyeonhan's current assets and current liabilities stood at 2.9 billion won and 18.6 billion won, respectively, resulting in a current ratio of about 15%. This means it has 2.9 billion won in cash or assets that can be liquidated within a year, while it faces 18.6 billion won in debt due within the same period.

Ultimately, Ecoglow's stock price needs to rise, but continued losses over several years have heightened market anxiety. Ecoglow posted consolidated sales of 14.5 billion won, an operating loss of 6.3 billion won, and a net loss of 6.1 billion won last year. It also recorded net losses of 9.4 billion won in 2023 and 10.1 billion won in 2022, marking three consecutive years of deficits. The company remained in the red in the first half of this year, with accumulated deficits reaching 82.9 billion won.

Ecoglow is a company engaged in cosmetics Original Equipment Manufacturing (OEM) and Original Design Manufacturing (ODM). In 2020, it entered the chlorine dioxide product and dental mask business for COVID-19 prevention, but with little success, it exited the business in December 2021. It also operated a commerce business selling apparel, accessories, and cosmetics online to China, as well as a duty-free shop, but ceased operations last April due to continued losses.

Meanwhile, Ecoglow did not respond to inquiries regarding the largest shareholder's stock collateral agreements and the company's countermeasures.