Nomus, an entertainment technology company listed on the KOSDAQ in November 2024, primarily utilizes intellectual property (IP) from artists such as singers. However, the company is now facing a significant loss after entering a contract with Cha Ga-won, chairman of the Piak Group, at the end of last year. The estimated loss amounts to 24.2 billion won, nearly double the company's annual net profit from the previous year.
In light of this situation, Nomus recently decided to issue 40 billion won in convertible bonds (CB). While the company claims this move is aimed at securing funds for global business expansion, some analysts speculate it may be an attempt to cover losses related to Cha Ga-won.
According to the financial investment industry, Nomus announced on July 24 its decision to issue the third series of non-guaranteed, non-interest-bearing private placement CBs worth 40 billion won. The payment date was set for August 3, and the entire amount raised will be used for operational funds. The company plans to invest 10 billion won in 2026, 15 billion won in 2027, and another 15 billion won after 2028.
The conversion price for the CBs was set at 15,520 won per share, representing a 40% premium over the reference price. This is approximately 38.4% higher than the closing price of 11,210 won the day before the announcement. There are no provisions for adjusting the conversion price due to stock price declines. If all CBs are converted into shares, 2,577,319 new shares will be issued, accounting for 19.15% of the total shares outstanding. The conversion request period is from August 3, 2027, to July 3, 2031. The company stated that the purpose of the CB issuance is to secure new artist IP and expand overseas operations, but it did not disclose specific plans for the 40 billion won raised.
Market speculation regarding the purpose of the CB issuance is rife, especially in light of the significant losses Nomus incurred from its dealings with Cha Ga-won. Nomus had provided 24.2 billion won as an advance payment for a project involving the IP of its affiliated artists, but after the contract was not fulfilled, the company filed a fraud complaint against Cha in November of last year. Cha was subsequently arrested on August 7.
An industry insider pointed out, "Given that Nomus is in a situation where it has lent money to Cha and the recovery of the loss is uncertain, the issuance of CBs may place the burden on existing shareholders." While there is currently no immediate impact on shareholders, if the stock price exceeds the conversion price after the conversion request period begins next August, up to 2,577,319 new shares could be issued, leading to potential dilution for existing shareholders.
In response, Nomus stated, "The rumors that this CB issuance is intended to cover losses related to Cha Ga-won or to supplement liquidity are completely unfounded. We are currently taking necessary measures to recover the advance payment." The company added, "Before the CB issuance, we had approximately 20 billion won in cash assets and had secured sufficient liquidity. The conditions for this CB issuance would not have been met if there were a liquidity crisis."
As of the end of June, Nomus reported cash and cash equivalents of 6.37458 billion won, a decrease of about 4.7 billion won from 11.1781 billion won at the end of the previous year. In contrast, total liabilities increased by about 3.5 billion won to 15.24662 billion won from 11.7065 billion won at the end of the previous year.
* This article has been translated by AI.
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