Kangstem Biotech, a KOSDAQ-listed biotechnology company, is seeking to raise funds.
According to investment banking sources on July 28, Kangstem Biotech has recently selected Daishin Securities as the lead underwriter for a 30 billion won issuance of third-party allocated convertible bonds (CB). The funds raised will be allocated to research and development and operational expenses. The company aims to enhance its corporate value and investor sentiment based on clinical results from its key pipeline, including treatments for osteoarthritis, and new business achievements.
However, market analysts express uncertainty about whether the anticipated large-scale fundraising will proceed smoothly. A primary concern is the historical losses experienced by past investors. Kangstem Biotech has previously conducted multiple capital increases and mezzanine financing, but the stock price has not recovered post-issuance, leading to investor losses.
There is also a need to consider potential changes in the financial structure. As of the consolidated financial statements, Kangstem Biotech's total equity is approximately 62.2 billion won, while total liabilities stand at about 12.2 billion won. Although it appears that there is some capital capacity, the annual operating losses, which accumulate to around 18 to 20 billion won, are eroding this capital.
If the CB is issued and recognized as debt, and assuming an annual deficit of 20 billion won continues for the next two years, the current capital of around 60 billion won could decrease to about 20 billion won. Meanwhile, if existing debts are not repaid, total liabilities would increase to approximately 42 billion won, combining the existing 12.2 billion won with the new 30 billion won from the CB. Should investors exercise their put options without converting the CB into stock, the financial burden could significantly increase, as capital would drop to around 20 billion won while the repayment obligation for the CB would reach 30 billion won. Industry experts believe that future operating performance and the ability to secure cash assets will be key variables in investment decisions.
An official from the financial investment sector stated, "Kangstem Biotech has experienced significant losses as most of the convertible preferred shares issued during the 2019 capital increase for institutional investors fell below the conversion price. Given the accumulated disappointment among existing investors, there is considerable market caution regarding the absorption of 30 billion won in interest-free mezzanine financing based solely on pipeline expectations."
Meanwhile, Daishin Securities commented regarding the CB, stating, "No decisions or confirmations have been made yet."
* This article has been translated by AI.
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