[IPO Microscope] MedicalAI Dependent on Bodyfriend: Can Its IPO Break the Ties?

Tens of Billions in Transactions with Parent Company Bodyfriend... Annual Lease Payments as Well
Management Dispute at Bodyfriend Puts Transparency and Governance Stability under Scrutiny

Medical AI (MedicalAI), a subsidiary of massage chair company Bodyfriend, is seeking to list on the KOSDAQ market. Despite having almost no track record in terms of earnings, MedicalAI has been conducting its business by engaging in funding transactions worth several billions of won with Bodyfriend. Even now, it pays Bodyfriend a large sum every year in the form of lease fees.

Bodyfriend is currently in turmoil due to a dispute over management control and legal battles among insiders. Against this backdrop, the market is focusing on whether MedicalAI will be able to break away from Bodyfriend and survive independently after its listing.

According to the financial investment industry on the 25th, MedicalAI is an artificial intelligence-based medical solutions company. Its "cardiovascular disease diagnostic technology using an electrocardiogram analysis artificial intelligence algorithm (product name AiTiA Series)" has been recognized as a national strategic technology by the Ministry of Science and ICT. The company recently received A and A grades in a technology evaluation and is preparing for a "deep-tech (super-gap technology special listing) IPO."

MedicalAI was founded in November 2019 by emergency medicine specialist Kwon Junmyung, a graduate of Seoul National University College of Medicine, and Park Jinsik, chairman of the Hyewon Medical Foundation. In 2020, Bodyfriend invested 5.5 billion won to secure the position of largest shareholder. As of the end of the third quarter of last year, Bodyfriend held a 43.82% stake in MedicalAI.

Until recently, MedicalAI had been operated almost like a business division of Bodyfriend. After acquiring MedicalAI, Bodyfriend filled most of the management team, except for CEO Kwon Junmyung, with its own people. Former Bodyfriend CEOs Park Sanghyun and Kim Hongseok, current CEO Kim Cheolhwan, and directors Heo Myeongji and Cho Suhyeon all passed through MedicalAI.

Operating funds also came out of Bodyfriend's coffers. Between 2023 and 2024, MedicalAI borrowed and repaid 5 billion won from Bodyfriend, and additionally borrowed and repaid 1 billion won and 1.95 billion won, respectively, from Bodyfriend affiliates MC Technology and Everyall. Considering that MedicalAI's total assets amount to 13.5 billion won, these are large sums. Since MedicalAI has been posting annual losses of several billions of won, it is analyzed that Bodyfriend has been supplying liquidity to the company.

In addition to liquidity, MedicalAI is also borrowing key assets necessary for its business from Bodyfriend. As of the end of 2024, MedicalAI held 5.9 billion won in right-of-use assets, a large amount equivalent to 44% of its total assets.

MedicalAI's right-of-use assets represent the right to use a supercomputer owned by Bodyfriend. MedicalAI needs a supercomputer to perform electrocardiogram analysis using artificial intelligence, which is its core technology. Bodyfriend previously invested an estimated 9 billion won in 2021 to acquire the supercomputer.

MedicalAI signed a contract allowing it to use Bodyfriend's supercomputer for a fixed period and recognized the full contract amount as right-of-use assets. MedicalAI pays Bodyfriend about 1.6 billion won in usage fees each year while amortizing the right-of-use assets. Because it is difficult to generate these usage fees from current earnings, funds raised from external investors are effectively flowing back to Bodyfriend.

It is estimated that Bodyfriend has recouped most of the funds it spent to purchase the supercomputer through its lease contract with MedicalAI. In 2023, MedicalAI recognized 8 billion won in right-of-use assets, effectively committing to pay Bodyfriend 8 billion won over a certain period.

Given how closely linked MedicalAI is to Bodyfriend, Bodyfriend is also expected to become a key subject of review in the upcoming listing examination. The Korea Exchange is known to take into account factors such as the management transparency of the largest shareholder and the stability of the governance structure when reviewing listing applications.

Bodyfriend is currently embroiled in a management control dispute, with founder and former CEO Kang Woongcheol and Han & Brothers Chairman Han Juhui filing criminal complaints against each other on charges including embezzlement and breach of trust. During this process, the fact that some executives received high salaries from MedicalAI has also come under scrutiny.

Regarding this, a MedicalAI official stated, "The person accused of embezzlement by receiving an excessive salary is an individual affiliated with Han & Brothers, who has no connection to the current largest shareholder. We also filed a lawsuit over this matter, but it was dismissed with a non-indictment decision due to insufficient evidence," adding, "Since then, we have significantly enhanced our level of internal control by establishing an internal accounting management system."

The official further explained, "The reason we chose to use Bodyfriend's supercomputer under a long-term lease is that using other computing resources on a cloud basis was expected to cost three to five times more than the current structure, so we judged the lease to be rational from a capital efficiency perspective."

They added, "To ensure transparency and independence in our governance structure, we have formed a board of directors centered on third parties who have no conflicting interests with the largest shareholder, and we have established a stable management structure that is not subordinate to the influence of any particular shareholder by attracting external investment."