Ccube Third CB Investors Face Diverging Fortunes

CB Conversion Price Raised Right After Disclosure of Share Conversion
Conversion Price Increased from 4,035 Won to 4,270 Won

There is a stark contrast in the fortunes of investors in the third round of convertible bonds (CB) issued by Ccube. This is because the conversion price was adjusted upward the day after the announcement of the exercise of conversion rights.

According to the Financial Supervisory Service's electronic disclosure system DART on August 29, Ccube made two CB-related disclosures on August 27 and 28. On August 27, the company announced the exercise of conversion rights. The conversion price was 4,035 won, and the amount claimed was 1 billion won. The scheduled listing date is September 16. The following day, a disclosure was made regarding the adjustment of the conversion price, stating that it would be raised from 4,035 won to 4,270 won.

On August 28, Ccube's closing price was 4,265 won. Investors who exercised their conversion rights on August 27 are expected to see a return of about 6% if the current share price is maintained until September 16. Although the return is modest, the profit gap is likely to widen depending on future share price movements.

This is because, even after exercising the conversion rights, investors can choose to sell at their preferred time depending on the share price. For example, if the share price rises to 6,000 won, investors who converted their CBs to shares at 4,035 won would achieve a return of about 49%, while those converting at the current conversion price of 4,270 won would see a return of about 41%.

The reason for this difference is due to a revised regulation. Since December 2021, financial authorities have required that if a listed company issues CBs via private placement and lowers the conversion price due to a decline in share price, it must also adjust the conversion price upward if the share price subsequently rises. Previously, various conditions attached to share conversion during CB issuance led to issues such as dilution of existing shareholders’ equity.

Ccube issued CBs worth 15 billion won in June 2024. Of this, 10 billion won was allocated for overseas business investment and 5 billion won for internal operating funds. The coupon and maturity interest rates are 2.0% and 6.0%, respectively. At the time of issuance, the conversion price was 5,760 won, with a minimum conversion price of 4,032 won. The conversion period runs from June 28, 2024, to May 28, 2027.

Ccube is a manufacturer of pearlescent pigments. These pigments are used in industries (such as paints, wallpaper, and construction materials), automobiles (automotive paints, exterior building materials), and cosmetics (basic cosmetics, color cosmetics). In the first half of this year, sales and operating profit were 30.7 billion won and 6.4 billion won, respectively. Compared to the same period last year, sales increased by 0.021% and operating profit by 20.08%.