[After CB Issuance] NSN Lowers CB Conversion Price to Lowest, Stock Price Rebounds... Will They Also Pay for Rights Offering?

[Asia Economy Reporter Jang Hyowon] The stock price of NSN, a KOSDAQ-listed company, is rebounding after lowering the conversion price of its convertible bonds (CB) to the minimum limit. As the stock price rises, attention is focused on whether the paid-in capital increase worth 15 billion KRW, which has been awaited for about six months, will proceed.

Capture of NSN homepage.

Stock Price Rises After CB Repricing

According to the Financial Supervisory Service's electronic disclosure on the 23rd, the conversion price of NSN's 25th series CB was adjusted from the previous 1,280 KRW per share to 985 KRW on the 14th. When initially issued in May last year, the conversion price was 1,406 KRW, but as the stock price continued to fall, it dropped to the minimum conversion price limit. The minimum conversion price limit is 70% of the initial conversion price. Previously, the conversion price of the 23rd series CB, worth 14 billion KRW, was also lowered to the minimum adjustment limit of 1,036 KRW.

NSN's stock price has steadily declined since last year. At the time of issuing the 25th series CB, the stock price was moving around 1,300 to 1,400 KRW, but it fell to 850 KRW on the 15th, marking a 52-week low. As a result, not only the 25th and 23rd series CBs but also the 21st, 22nd, and 24th series CBs have all had their conversion prices lowered compared to the initial prices. As of the end of the third quarter last year, NSN held outstanding CBs worth 29.8 billion KRW.

Since 2015, NSN has posted operating losses on a consolidated basis every year. Last year, it recorded a cumulative operating loss of 8 billion KRW by the third quarter, an 82.8% increase in the deficit compared to the same period the previous year. Although sales increased, the deficit widened due to a significant rise in selling and administrative expenses. In particular, the payment fees for consulting and services within selling and administrative expenses increased more than 2.5 times from 1.1 billion KRW in the previous year to 2.8 billion KRW.

Along with poor performance, the stock price, which had been declining, began to sharply rebound as soon as the 25th series CB was adjusted to the minimum conversion price. It rose 59.4% based on closing prices within five trading days after the 15th. The closing price on the previous day was 1,355 KRW. The reason for the stock price increase is unknown.

As the stock price rises, CB investors are smiling broadly. These CBs were issued before November last year, so their conversion prices are not subject to upward adjustment. In fact, if the stock price (1,355 KRW) is maintained until the conversion date for holders of the 25th series CB, a 37.6% profit is possible.

Risk of Penalty Points if Capital Increase Delays Again

With the stock price sharply rebounding, attention is also focused on the 15 billion KRW paid-in capital increase that NSN is promoting. In July last year, NSN decided on a third-party allotment paid-in capital increase worth 15 billion KRW targeting its largest shareholder, JK Partners 1st Investment Association. The issue price per share is 1,280 KRW.

However, the payment for the capital increase has been postponed three times and rescheduled for the 25th. Meanwhile, the stock price has continuously remained below the issue price per share.

If the payment for this capital increase is delayed again, NSN may face sanctions from the Korea Exchange. If the payment date is postponed for more than six months after deciding on the capital increase, the exchange designates the company as a non-compliant disclosure corporation and imposes penalty points.

NSN already received 4 penalty points in November last year for the 'termination of a single sales and supply contract,' and at that time, 6 penalty points were accumulated within one year. KOSDAQ-listed companies face trading suspension and a substantive review of listing eligibility if they accumulate 15 or more penalty points within one year.

Meanwhile, NSN operates ICT businesses such as computer and peripheral distribution, bicycle business, and biometrical business including the development of brain disease treatment devices.

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