Jeju Beer, Largest Shareholder Change After 3 Years of Listing

Jeju Beer is changing ownership three years after its listing. It attracted attention as the first craft beer company to enter the KOSDAQ market, but it failed to meet the sales forecasts presented at the time of listing over the past three years. The largest shareholder is selling all of their shares at a price below the public offering price of 3,200 KRW.

According to the Financial Supervisory Service's electronic disclosure system on the 20th, Moon Hyuk-gi, CEO of MBH Holdings, the largest shareholder of Jeju Beer, will sell the shares held at 1,175 KRW per share. The total contract amount is 10.2 billion KRW, and Double H M will acquire the shares. Along with the change of the largest shareholder, fundraising will be pursued. Convertible bonds worth 20 billion KRW will be issued to Suong Investment Association, and bonds with warrants worth 20 billion KRW will be issued to Ildu Investment Association. New shares will be issued through a third-party allotment capital increase, raising an additional 10 billion KRW. GY Investment Association will subscribe to the new shares.

Jeju Beer is a company that manufactures and sells craft beer using raw materials from Jeju or inspired by Jeju elements. Previously, Jeju Beer was listed on the KOSDAQ market on May 26, 2021. Daishin Securities, the lead underwriter, valued the stock at 3,726 KRW per share. After demand forecasting, the final public offering price was set at 3,200 KRW per share.

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To determine the appropriate enterprise value (EV), the EBITDA valuation method was applied. EV/EBITDA is an indicator showing how many times the operating assets used in actual operations are worth relative to the profit earned from operating activities. This considered the unique characteristics of the beer manufacturing industry, where depreciation related to equipment and facility investments accounts for a large portion of total costs. The sales estimates were presented as 49.5 billion KRW in 2021, 78.3 billion KRW in 2022, and 114.7 billion KRW in 2023. Operating profits for the same period were estimated at 1.3 billion KRW, 10.9 billion KRW, and 21.9 billion KRW, respectively.

Jeju Beer recorded sales of 28.8 billion KRW and an operating loss of 7.2 billion KRW in 2021. Sales and operating losses in 2022 were 24 billion KRW and 11.6 billion KRW, respectively, showing a decline compared to the previous year. The company explained that the scale of losses increased due to higher cost of goods sold caused by the economic downturn and rising raw material prices. The poor trend continued until last year. Sales decreased by 6.3% year-on-year to 22.5 billion KRW, and operating losses narrowed to 11 billion KRW. Considering that the company had cited the prolonged COVID-19 pandemic and economic slowdown as risk factors while preparing for the listing, it is difficult to avoid criticism of 'inflated forecasts.'

Jeju Beer used part of the funds raised through its initial public offering (IPO) to improve efficiency in each production process but failed to turn a profit. Sales did not grow as quickly as expected. The stock price trend after listing also fell short of expectations. Except for the early period after listing, the stock price exceeded the public offering price for only about two months.

As profitability and financial structure deteriorated, external capital injection became inevitable, and Jeju Beer's management appears to have had no choice but to sell management rights and shares. An industry insider said, "With the change of Jeju Beer's largest shareholder and large-scale funds, the company will enter overseas markets. If it shows growth by expanding into overseas markets, it will be able to regain trust."

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