Daily Blockchain Refinances CareLabs Mortgage Loan During M&A... Negotiations Break Down

[Asia Economy Reporter Jang Hyowon] Daily Blockchain refinanced the secured loan on Carelabs shares while negotiating the sale of its stake in Carelabs. After the negotiations broke down, there are concerns that the refinancing was done by exploiting the sale issue.

According to the Financial Supervisory Service's electronic disclosure on the 9th, Daily Blockchain extended the securities lending contract for 446,523 shares of Carelabs with Lim and three others on the 25th and 29th of last month. They lent out Carelabs shares and received cash in return.

Earlier, in mid-May, Daily Blockchain entered into a securities lending contract worth 5 billion KRW with them. According to the company, this was essentially a stock-secured loan. The counterparties are known to be acquaintances of Lee Sanghyuk, CEO of Yellow Mobile. The largest shareholder of Daily Blockchain is Yellow Mobile.

Through this securities lending contract, Daily Blockchain refinanced the loan it had previously received from Korea Investment & Securities secured by Carelabs shares. Daily Blockchain had provided 422,118 Carelabs shares as collateral to Korea Investment & Securities and borrowed 4 billion KRW. The maturity was until May 29.

Daily Blockchain is the largest shareholder holding 1,894,839 shares (22.54%) of Carelabs. Besides the securities lending volume, it has provided 483,339 shares as collateral for employee loans and 900,000 shares as collateral for the 6th convertible bonds (CB). Almost all of the shares are pledged as collateral.

The timing of Daily Blockchain's refinancing of the loan from Korea Investment & Securities coincided with active discussions on the sale of Carelabs. In March, Daily Blockchain selected Maple Investment Partners as the preferred bidder and discussed the sale of affiliate shares, CBs, and bonds with warrants (BW).

News of the merger and acquisition (M&A) caused Carelabs' stock price to surge. The stock price, which was around 10,000 KRW on March 17, soared to an intraday high of 29,000 KRW on the 25th of last month. It also benefited from the remote medical care issue highlighted by the COVID-19 pandemic.

Then, Daily Blockchain reportedly wanted a much higher price than the previously agreed price of around 18,000 KRW per share. Maple Investment Partners, having secured funds by partnering with TS Investment, offered around 26,000 KRW per share, but the deal ultimately fell through on the 30th of last month. Carelabs' stock price has since deflated and dropped back to the low 20,000 KRW range this month.

Daily Blockchain announced, "The sale of Carelabs was canceled because Maple Investment Partners, the selected preferred bidder, did not sign the final contract for the transaction and did not deposit the 3 billion KRW earnest money into the designated account by the end of the exclusive negotiation period."

As a result, the market is raising concerns that the M&A issue was used to refinance the stock-secured loan. Doubts are also growing about CEO Lee Sanghyuk's willingness to sell Carelabs. Currently, Yellow Mobile's listed affiliates include Carelabs, Daily Blockchain, and Future Stream Networks.

As of the end of Q1 this year, Daily Blockchain recorded consolidated sales of 24.1 billion KRW, excluding Carelabs' portion, which amounted to 3.3 billion KRW. On a separate basis, it has posted losses every year except in 2018. Future Stream Networks also recorded an operating loss of 400 million KRW in Q1 this year.

In fact, Carelabs is the core affiliate of Yellow Mobile. Carelabs recorded sales of 14.9 billion KRW and operating profit of 2.5 billion KRW on a separate basis in Q1 this year.

A Daily Blockchain official said, "We are not officially proceeding with the sale process after the withdrawal of the preferred bidder selection, but we understand that CEO Lee Sanghyuk is contacting some potential buyers."

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