This article was published on Dec. 13, 2024, at 4:06 p.m. on the Chosun Biz Money Move (MM) website.
Schmidt, a startup accelerating (AC) company and a subsidiary of venture capital (VC) firm DSC Investment, has returned half of the investment funds it secured three years ago. This comes as numerous investors who had aimed to recover their investment through convertible bonds (CB) after the company went public have demanded early repayment of their principal.
According to the investment banking (IB) industry on the 13th, Schmidt recently repaid 1.5 billion won, half of the 3 billion won issued on Dec. 3, 2021, for the '1st designated non-guaranteed private CB.' The maturity date is Dec. 3, 2026, but all institutional investors exercised their early claim rights.
Originally, the time for exercising early claim rights was set at 36 months after the issuance of the CB. It was contracted to allow early claims for up to 50% of the principal. As this time approached, investors opted for the full amount available for recovery.
Industry analysts suggest that investors chose to exercise early claim rights to minimize losses. An IB industry official said, 'Investors accepted the unfavorable condition of “can claim a maximum of 50%” and aimed for returns from converting to common shares after Schmidt’s IPO, but as the recent IPOs of AC became increasingly challenging, they decided on a quick recovery.'
In fact, Schmidt had planned to utilize the investment funds raised during the CB investment round as new fund investments to increase its managed assets and aimed to go public by 2026, five years later. As a result, the nominal interest rate was set at 0%. The interest rate at maturity for the CB was set at 4%.
However, as of now, there is not a single AC listed on the stock market. Although ACs have attempted to go public in succession to increase their capital size, they have repeatedly faced failures. Last year, Flupoint Partners and Future Play withdrew their IPOs, and this year, CNT Tech also failed in its attempt.
The industry points out that the high investment risk associated with ACs, which primarily invest in early-stage startups, poses a significant hurdle to going public. The lack of interest from investors in VCs that have a similar business structure to ACs is also a negative factor. Among the 19 VCs listed on the KOSDAQ market, it has been determined that not a single company’s current stock price exceeds its public offering price.
Schmidt plans to continue its efforts to go public as early as 2026, but market analysts believe this will not be easy. The venture investment market continues to shrink. Schmidt's revenue last year was 3.4 billion won, and its net profit stood at 700 million won.
Meanwhile, Schmidt was established in 2017 as an AC subsidiary of DSC Investment. It functions as a so-called 'investment discovery spearhead' that early identifies and nurtures promising startups, leading the follow-up investments of DSC Investment, having achieved approximately 165 billion won in assets under management (AUM) in just five years.