"Kept It Just Under 5 Billion Won to Avoid Disclosure": Lunit Executives' Shocking Share Sale Tactics That Betrayed Shareholders [At a Crossroads] Lunit ③

IPO Price Inflated by “Rosy Projections”

Executives Cash In Through “Trick” Share Sales as Stock Plummets

“No Rights Offering” Pledge Broken with New Capital Raise in the New Year

Controversy continues to surround the credibility of Lunit, which is currently conducting a large-scale rights offering allocated to existing shareholders. This ongoing debate stems from several factors: the company's net income forecast at the time of listing was off by more than 100 billion won; in the meantime, executives engaged in actions that disappointed shareholders, such as so-called "trick" share sales. The current capital increase is also adding fuel to the debate, as it reverses the company’s previous stance that there were "no plans" for such an offering.

According to the Financial Supervisory Service's electronic disclosure system on March 4, Lunit was listed on the KOSDAQ market on July 21, 2022, through a technology exception. At the time, the company was running a net loss of 56.1 billion won, so the initial public offering (IPO) price was determined by discounting future estimated net income to present value.

The performance projections Lunit presented were dramatic. The company forecast the deficit would shrink to 24 billion won in 2023, followed by a swing to a net profit of 8.6 billion won in 2024, and a net income of 58.3 billion won in 2025. These projections were discounted to 2022 present value and multiplied by the industry average price-earnings ratio (PER) to determine the IPO price range (44,000 to 49,000 won per share). Through this, Lunit secured 36.5 billion won in funding.

However, actual performance was dismal. Lunit recorded a net loss of 36.8 billion won in 2023 and a net loss of 82.4 billion won in 2024. As of the end of the third quarter last year, the accumulated net loss was 15 billion won. The reason last year’s third-quarter net loss appears relatively small is because a gain of 81.3 billion won from the revaluation of convertible bond (CB) derivative financial liabilities was recorded due to a decline in the share price, which did not result in any actual cash inflow. Excluding this, the operating net loss is estimated to be even larger. In essence, the IPO price was "inflated."

In its latest securities registration statement, Lunit actually admitted to having presented unreliable estimates at the time of listing. The company cited a significant gap in performance projections, attributing it to three main errors: incorrect assumptions about global market penetration rates; insufficient understanding of hospital adoption structures; and misjudgment of the decision-making framework within the pharmaceutical industry.

As a result of these discrepancies, Lunit's share price has been on a downward trajectory. The losses have been borne by the shareholders.

Amid this, Lunit's executives drew further criticism by engaging in "trick" share sales. On December 18, 2024, six executives, including Chief Financial Officer Park Hyunseong and Chief Product Officer Paeng Kyunghyun, sold a portion of their holdings via block deals (after-hours bulk trades) to a U.S.-based fund management company.

Each executive sold 64,156 common shares at 77,934 won per share, amounting to 4,999,993,704 won per person. The market pointed to the "insider trading pre-disclosure system" as the reason the sale price per executive did not exceed 5 billion won.

This system requires insiders who intend to sell more than 1% of shares or conduct transactions exceeding 5 billion won to disclose the price and quantity at least 30 days in advance, in order to prevent a sharp drop in the share price due to large insider sales. There are suspicions that the executives intentionally kept the amount below 5 billion won per person to avoid notifying shareholders of their sales. After this transaction, Lunit's share price plummeted.

Having already lost shareholder trust, Lunit once again turned to its shareholders for support. This comes less than a year after it declared there would be "no rights offering." A company representative stated, "What we meant at last year's regular general meeting in March, when we said there were no plans for a capital increase, was that for 2025, there were no additional rights offering plans."

The Lunit representative added, "Even if there have been changes in market conditions and a resulting adjustment to our strategic direction, we feel a heavy sense of responsibility for failing to meet the performance targets presented at the time of listing and disappointing our shareholders. Through this rights offering, we aim to transform our financial structure and achieve break-even by the end of this year."

This content was produced with the assistance of AI translation services.