[At the Crossroads] Ewha Compotech ② Is the Group Behind Major Bio Losses Exiting After Leaving Hyundai Supplier Roots?

Stock Price Volatility Driven by Bio and Fund Investments
Company Suffers Major Losses as Key Players Quietly Prepare Their Exit

The group that had been driving the bio business at Kosdaq-listed Ewon Comfortech has reduced its stake to below 5%. As a result, any future share sales will no longer be subject to disclosure requirements. This group was once the largest shareholder of Ewon Comfortech and led the company's venture into the bio sector, which resulted in significant losses for the company.

According to the Financial Supervisory Service's electronic disclosure system on November 12, Prophase Sciences, LLC, a major shareholder of Ewon Comfortech, announced that it sold 10,000 shares on the market on November 10, lowering its stake to 4.99%. Previously, its stake was 5.01%.

Now that its stake has dropped below 5%, Prophase Sciences is no longer required to disclose any further share sales. This means that even if all 1,990,019 shares currently held by Prophase Sciences are sold on the market, general investors would not be informed.

Prophase Sciences became the largest shareholder of Ewon Comfortech in November 2019 by participating in a third-party allocation paid-in capital increase. At that time, it acquired 2.8 million shares for a total of 8.26 billion won, or 2,950 won per share. Its initial stake was 16.42%.

After becoming the largest shareholder, Prophase Sciences appointed lawyer Lee Kyunghoon as CEO of Ewon Comfortech, along with Hong Jinyoung, former head of the machinery business division at Hyundai Wia. Notably, Lee Kyunghoon had no prior business experience. Other board members included Seo Mundonggun, CEO of J-Stephan; Shin Heeju, CEO of S-Mark; and Scott Waldman, professor at Thomas Jefferson University.

With the new board, Prophase Sciences launched a new bio business at Ewon Comfortech by establishing a drug development research corporation called "Innovation." Ewon Comfortech, which had previously supplied automotive seats and interior products to Hyundai Motor Company and Kia Motors, had no prior involvement in the bio sector.

Subsequently, Ewon Comfortech focused more on investments in other fields and promoting its bio business than on its automotive business. The stock price experienced sharp fluctuations in response to related news. On December 17, 2019, Ewon Comfortech's share price reached an all-time high of 19,550 won, and throughout 2020, it hovered above 10,000 won. During this period, Prophase Sciences repeatedly conducted paid-in capital increases, share sales, and issued and sold convertible bonds (CB).

However, Ewon Comfortech's performance deteriorated. In 2020, the first year after the acquisition by Prophase Sciences, Ewon Comfortech's sales dropped by 26.9% to 35 billion won, and operating profit swung from a profit of 1.4 billion won the previous year to a loss of 5.2 billion won. Net loss for the year reached 15 billion won, marking a substantial deficit.

Investment losses were a major contributor to these deficits. In June 2020, Ewon Comfortech invested 30 billion won in Initial No.1 Investment Association. This fund held shares in listed companies such as Vidente and Bucket Studio, which were associated with Kang Jonghyun, who claimed to be the real owner of the virtual asset exchange Bithumb and is currently on trial for embezzlement and breach of trust. Ultimately, Ewon Comfortech recognized a loss of about 7 billion won from this investment within a few months.

Ewon Comfortech has continued to post net losses for five consecutive years. As of last year, the company recorded a net loss of 21 billion won. In the first half of this year alone, it posted an accumulated deficit of 4.8 billion won. With these ongoing losses, the share price has plummeted to the 1,000-won range.

Regarding this, former CEO Lee Kyunghoon stated, "I needed about 10 million won, so I borrowed the amount by selling some of the Ewon Comfortech shares held by Prophase Sciences and converting them to cash," adding, "Since the average purchase price of Ewon Comfortech shares held by Prophase Sciences is high, there are no plans to sell more."

Meanwhile, Ewon Comfortech's largest shareholder changed from Prophase Sciences to Ohha in September 2023, then to SH No.1 Fund in October, and most recently to Rain Partners in June.