[Company Exploration] Bflysoft, Reasons for the Wingless Plunge Despite No Additional Stock Issuance

[Asia Economy Reporter Jang Hyowon] The stock price of Bflysoft, a KOSDAQ-listed company, has plummeted by more than 60% following a free share issuance. It is one of the stocks with the largest decline among companies that conducted free share issuances this year. Bflysoft was listed in June and has shown poor performance, including recording lower-than-expected third-quarter earnings, which is analyzed as the reason for the weak stock price.

Bflysoft is a media big data company that collects data from over 3,000 media outlets, processes content, and provides platform services. It operates services such as news copyright distribution ‘iSurfer’, digital archive construction ‘Digitizing’, media big data analysis ‘Wegomon’, and personalized information ‘Roseus’.

Bflysoft was listed on the KOSDAQ through a technology special listing. After initially listing on KONEX in November 2016, it transferred to KOSDAQ about five and a half years later in June. The technology that enabled the special listing is ‘layout automatic recognition-based digitizing,’ which converts analog documents into digital text.

The demand forecast at the time of listing was poor. Bflysoft’s public offering price range was 16,500 to 19,000 KRW. It planned to raise 16.5 to 19 billion KRW by issuing 1 million shares. However, in the demand forecast for institutional investors, 247 out of 255 institutions proposed prices below the lower limit of the offering price band, resulting in an actual public offering price of 10,000 KRW.

Failing to attract strong interest, Bflysoft debuted on the KOSDAQ market on June 20 and showed a downward trend from the first day. After continuing weakness, Bflysoft’s stock price suddenly surged for four trading days starting July 7. This was interpreted as due to the free share issuance. On the fifth trading day, July 13, Bflysoft announced a large-scale free share issuance allocating four shares per one share.

The free share issuance fund was 12.6 billion KRW from capital surplus. At the time of the KOSDAQ transfer listing, Bflysoft issued 824,000 new shares. With a par value of 500 KRW, 412 million KRW was reflected as capital, and about 7.8 billion KRW was recorded as capital surplus on the financial statements. Ultimately, the funds raised at listing were used as the source for the free share issuance.

However, even after the free share issuance announcement, Bflysoft’s stock price failed to gain upward momentum. On the day of the announcement, it closed down 17%. Although it hit the upper limit price on the ex-rights date of July 27, it continued to decline afterward, recording a 61% drop compared to the closing price on the free share issuance announcement date as of the 21st.

The reason why the free share issuance failed to boost the stock price is analyzed to be because Bflysoft reported third-quarter earnings far from the performance outlook predicted at the time of listing.

In terms of performance, Bflysoft has continued to post losses for about five years from 2018 through the third quarter of this year. As of the end of the third quarter this year, on a separate basis, it recorded cumulative sales of 12 billion KRW and an operating loss of 1.5 billion KRW. Sales increased by 2.4% year-on-year, while operating loss expanded by 12.1%.

At the time of listing, Bflysoft internally forecasted total sales of 23.9 billion KRW and operating profit of 2.9 billion KRW for this year. To meet these expectations, it would need to record sales of 12 billion KRW and operating profit of 4.4 billion KRW in the fourth quarter alone. This means it must suddenly generate a large operating profit in one quarter after posting operating losses through the first three quarters.

Additionally, Bflysoft expected sales of about 1.7 billion KRW from its core growth engines ‘Wegomon’ and ‘Roseus’ this year, with approximately 1.7 billion KRW and 1.6 billion KRW respectively. However, as of the third quarter, Wegomon’s sales were 90 million KRW, and Roseus’s sales were not reported in the quarterly report.

A financial investment industry official said, “There are cases where stock prices surge due to free share issuances, but most tend to return to their original state,” emphasizing, “Ultimately, it is the company’s performance rather than short-term issues that determines the direction of the stock price.”

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