[CB Crisis] EDGC's Cash Shrinks Amid Repeated Early Redemption Requests

Stock Price Declines Amid Continued Poor Performance
Over 20 Billion Won Early Repayment This Year
Cash Assets Depleted Amid Poor Earnings

[Asia Economy Reporter Hyungsoo Park] Genomic big data company EDGC is depleting its cash to repay the 3rd tranche convertible bonds (CB) issued two years ago.

According to the Financial Supervisory Service's electronic disclosure system on the 15th, EDGC made an early repayment of the 3rd tranche CB worth 4.9 billion KRW on the 2nd. As bondholders exercised their early redemption rights (put option), approximately 5 billion KRW including principal and interest was paid.

Previously, EDGC issued the 3rd tranche convertible bonds (CB) through a public offering to raise facility and operating funds. The nominal interest rate was 0.0%, with a maturity interest rate of 1.0%, raising 60 billion KRW. Most investors participated in the public offering with the intention of converting to common stock for profit if the stock price rose.

NICE Credit Rating and Korea Credit Rating evaluated EDGC's CB credit rating as 'B+ Stable' and 'B+ Negative,' respectively. At that time, its affiliate Solgent was improving performance by supplying COVID-19 diagnostic kits to Europe, Southeast Asia, and the Middle East. Since there was significant interest in diagnostic kits, EDGC was able to raise funds smoothly.

EDGC used the raised funds to secure a research and development center and expand healthcare infrastructure. Additionally, it invested in advancing cancer diagnostic liquid biopsy technology and researching antibody new drugs.

Two years have passed since the large-scale investment. EDGC's sales were 92.5 billion KRW in 2020 and 89.3 billion KRW last year. Based on cumulative figures for the third quarter this year, sales reached 67.2 billion KRW. Operating losses increased from 5.1 billion KRW in 2020 to 15.6 billion KRW in 2021. The cumulative operating loss for the third quarter this year was 8.4 billion KRW.

Amid poor performance, the stock price also declined. The stock price is about 60% lower than at the time of CB issuance. Although the conversion price could be adjusted down to 80% of the initial conversion price if the stock price fell, the decline exceeded this threshold. The conversion price dropped to 5,469 KRW, but the current stock price remains around 2,000 KRW.

Since the maturity interest rate is not high and the gap between the stock price and conversion price has widened, more investors are exercising their early redemption rights (put options). Over 20 billion KRW has been repaid before maturity this year. Most have been repaid early, leaving a balance of only 2.05 billion KRW.

Early redemption through exercising put options is also affecting EDGC's liquidity. Cash and cash equivalents decreased from 27.5 billion KRW at the end of last year to 3.5 billion KRW at the end of the third quarter this year.

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