JW Biotech Establishes New Company by Redirecting Funds Through Subsidiary... Purpose of 'Major Shareholder Eligibility Review' ② [Listed Companies at a Crossroads]

[Asia Economy Reporter Jang Hyowon] It has been revealed that GW Vitec, a KOSDAQ-listed company, invested funds into a new technology finance business (New Tech Finance) subsidiary through SNP Genetics, a KONEX-listed company it acquired last month. Since GW Vitec has a history of embezzlement and breach of trust, directly investing in the New Tech Finance business could lead to disqualification in future major shareholder suitability reviews, making this a strategic move to avoid such issues.

According to the Financial Supervisory Service's electronic disclosure on the 24th, SNP Genetics issued the second tranche of convertible bonds (CB) worth 2 billion KRW on the 14th of last month. On the same day, it also conducted a third-party allotment paid-in capital increase worth 2.5 billion KRW. In total, 4.5 billion KRW was raised. The recipients of the CB and capital increase were GW Vitec.

Earlier, on the 1st of last month, GW Vitec acquired 742,155 shares (40.7%) and management rights of SNP Genetics from the former largest shareholder Shin Hyungdoo and one other person at 12,721 KRW per share, totaling 9.4 billion KRW. The first management action by GW Vitec after taking over management rights at the shareholders' meeting was a paid-in capital increase and CB issuance targeting the largest shareholder.

Four days after the capital increase and CB funds were received, SNP Genetics invested 3 billion KRW in a corporation called GW IB. GW IB is a newly established corporation with the business purpose of investing in, financing, and providing management and technical guidance to new technology businesses. It was established with a capital of 5 billion KRW, with SNP Genetics contributing 3 billion KRW and GW Vitec 2 billion KRW.

The management of GW IB consists of two inside directors, one outside director, and one auditor. The inside directors are Yang Jaewon, CEO of GW Vitec, and Kim Jungguk, another non-executive director of GW Vitec. The auditor is Kim Dongyun, an outside director of GW Vitec. Essentially, it is a corporation under the influence of GW Vitec.

In the end, although GW Vitec could have established GW IB by investing 5 billion KRW on its own, it effectively obtained SNP Genetics' CB and shares by circulating 3 billion KRW through SNP Genetics as an investment. For SNP Genetics, a significant portion of the funds received from GW Vitec flowed into GW IB.

The CB of SNP Genetics acquired by GW Vitec is analyzed to be on very favorable terms for GW Vitec. First, the conversion price of this CB is 7,000 KRW, which is lower than the current stock price. As of the previous day, SNP Genetics' stock price was 9,100 KRW.

Additionally, if the stock price falls, the conversion price can be reset (refixed) down to 4,900 KRW, which is 70% of the original price, providing downside protection. Even if the price falls below that, the maturity interest rate is 5%, so a considerable yield is expected.

Moreover, 50% of this CB includes a call option (early redemption right). Starting from July 14, every three months, SNP Genetics or a third party designated by the company can acquire more than half of the CB. This structure allows the major shareholder or a specific individual to realize profits from the CB in the future.

A GW Vitec official explained, "The reason for establishing GW IB jointly with SNP Genetics was to divide the initial investment shares considering the possibility of major shareholder suitability issues in the future new technology business finance company registration review due to the embezzlement and breach of trust incident by the former GW Vitec management in 2019," adding, "We plan to create an investment firm specialized in industries that form the bio infrastructure in the future."

Meanwhile, SNP Genetics is a KONEX-listed company engaged in genome analysis and Korean cattle identification gene diagnostics. Last year, it recorded sales of 1.2 billion KRW and an operating loss of 200 million KRW. In 2020, it recorded sales of 800 million KRW and an operating loss of 400 million KRW.

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