[CB Crisis] ⑤ WI, CB Investors' Fortunes Diverge by One Day Difference

WI Stock Hits Daily Limit for 21st Consecutive Day... Large-Scale Capital Increase Targeting Lithium Insight
Put Option Exercise Period Arrives After June Last Year CB Issuance

[Asia Economy Reporter Hyungsoo Park] As WI received a large-scale investment and its stock price surged, some investors of the convertible bonds (CB) issued last year exercised their early redemption rights (put options). The opportunity to convert to stocks and gain excess profits disappeared by just a day or two.

According to the Financial Supervisory Service's electronic disclosure system on the 27th, an investor holding the 15th series CB exercised the put option for 2.4 billion KRW on the 21st. WI decided to acquire and cancel the CB for 2.4606 billion KRW, including interest of 60.6 million KRW.

The closing price of WI on the day before the put option exercise, the 20th, was 1,140 KRW, which was lower than the 15th series CB conversion price of 1,160 KRW. Looking at WI’s stock price trend after June 21, when the CB put option could be exercised this year, it consistently stayed below 1,000 KRW. In September, the stock price declined further, hitting a 52-week low of 798 KRW during trading on the 5th. Given the large gap between the conversion price and the stock price, the CB investor likely decided to exercise the put option to at least recover the principal.

Previously, WI issued 15th series CB worth 10 billion KRW through a private placement in June last year to raise operating funds. Eugene Investment & Securities invested 5 billion KRW, and JJ Asset, Jungwoo Holdings, among others, also participated. The funds were raised under conditions of a 0.0% nominal interest rate and a 2.0% maturity interest rate. The initial conversion price was 1,655 KRW, with a refixing adjustment allowed up to 70% due to stock price declines. After the CB issuance, WI’s stock price declined, lowering the conversion price to 1,160 KRW. Along with the put option, a call option for sale request rights was also included in the issuance terms. WI can require CB holders to sell up to 40% of the issued amount to a third party.

WI is a company that manufactures and sells content products utilizing intellectual property (IP) and mobile phone accessories. In the first half of this year, it recorded sales of 10.3 billion KRW and an operating loss of 900 million KRW. Compared to the same period last year, when sales were 8 billion KRW and operating loss was 2.5 billion KRW, sales increased and operating losses decreased. Although performance improved, the stock price was sluggish. It fell about 30% until the 19th of this year. There were rebounds in early January and early April, but after the put option exercise start date, the stock price remained below the conversion price.

The previously sluggish stock price trend recently reached a significant turning point. On the 21st, it surged to the daily limit and closed at 1,480 KRW. The stock price continued its upper limit rally the next day. On the 23rd, it rose to 2,070 KRW but then dropped to 1,775 KRW amid a sharp decline in the KOSDAQ market. If the CB investor had not exercised the put option and instead requested conversion rights, the stock price trend could have yielded principal plus excess profits exceeding 1 billion KRW. Of course, after requesting conversion rights and new shares listing, the stock price might not have maintained the current level. However, given that WI is attracting large-scale funds and seeking new growth engines, expectations among CB holders are likely to increase.

The sudden surge in WI’s stock price is related to large-scale fundraising. On the 21st, WI announced a third-party allotment rights offering of 40.6 billion KRW to Lithium Insight. It will issue 50 million new shares at 811 KRW per share. The payment date is next month on the 31st, and the new shares will be listed on November 16. Upon completion of the capital increase procedure, Lithium Insight could become WI’s largest shareholder. WI plans to hold an extraordinary general meeting on November 4 to add the manufacturing and sales of secondary battery materials to its business objectives and to appoint new directors and auditors. Lithium Insight, which possesses advanced lithium refining technology, is expected to acquire WI and promote the secondary battery materials business. Lithium Insight is a related company of Lithium Plus, which has started mass production of lithium hydroxide, a core material for secondary batteries. CEO Jeon Woong of Lithium Insight also serves as CEO of Lithium Plus.

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