Sewon Major Shareholder Acent Sued Over Controversy Surrounding Convertible Stock Trading Agreement①

[Asia Economy Reporter Jang Hyowon] It has been confirmed that Acent, the largest shareholder of KOSDAQ-listed company Sewon, signed a contract to sell Sewon shares included as a repayment condition in the convertible bonds (CB) it issued. The contract later fell through, and the buyer filed a fraud lawsuit against Acent and IA management.

According to the Financial Supervisory Service's electronic disclosure on the 9th, on July 3rd, Acent, the largest shareholder of Sewon, and IA each signed a contract to sell 4,227,720 shares (18.08%) and 2,260,000 shares (9.67%) of Sewon they held to Quad Pioneer No.1 Association at 4,326 KRW per share, totaling 28 billion KRW.

Among these, some of the Sewon shares held by Acent are subject to a repayment option of the CB issued by Acent.

Previously, Acent became the largest shareholder of Sewon through a third-party allotment paid-in capital increase in May 2018. At that time, it participated in a 10 billion KRW capital increase and secured an 18.89% stake.

Acent, with a capital of 50 million KRW, raised 10 billion KRW by issuing CBs. At that time, ‘Jet KD Holdings Korea’ (now GZGX), an investor in YouJoint (now AB ProBio), received Acent’s CB and invested 10 billion KRW. Acent was a subsidiary of YouJoint, which IA acquired last year.

The 10 billion KRW CB issued by Acent includes two repayment conditions in addition to the right to convert into Acent shares. At the CB holder’s choice, repayment can be made either ▲in the face value amount or ▲in Sewon shares equivalent to the face value amount. Calculating at the current stock price of 4,400 KRW, the CB holder could receive more than 2.27 million shares.

This condition is similar to exchangeable bonds (EB). Nevertheless, Acent signed a contract to transfer Sewon shares. In the case of EB, the exchange target shares must be deposited with the Korea Securities Depository to prevent ownership changes that would eliminate exchange value.

A bond management official said, “It is common to provide real estate or other assets as collateral for CBs, but including owned shares as a repayment condition is rare.”

Currently, Acent’s 10 billion KRW CB is held jointly by IA, IA Networks, and a third party. Acent and IA signed a contract to sell Sewon shares while holding CBs that can be repaid in Sewon shares.

Regarding this, an IA official claimed, “The convertible bonds issued by Acent had the option from the initial issuance to repay the principal and interest in Sewon shares, but repayment in Sewon shares is not mandatory. Since there was already an agreement with creditors (IA, IA Networks, etc.) on the sale of Sewon shares, there is no problem.”

However, the maturity interest rate of Acent’s CB is 0%. If CB holders do not receive repayment in Sewon shares, they must be repaid the face value amount. The face value amounts of Acent CBs held by IA and IA Networks are 3.926 billion KRW and 3.624 billion KRW, respectively.

IA and IA Networks acquired Acent’s CBs last year for 7.3 billion KRW and 6.7 billion KRW, respectively. They bought them at about 87% above the face value. If they are repaid at face value, they would incur losses of 3.4 billion KRW and 3.1 billion KRW, respectively.

Meanwhile, Quad Pioneer Association, the buyer of Sewon shares, announced that it filed a fraud lawsuit against Raymond Kim, CEO of Acent, and Kim Dongjin, CEO of IA.

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