The stock price of Action Square has surged since Jang Hyun-guk joined as co-CEO. The company recently added a call option to its fourth convertible bond (CB) issuance. The seller of the call option is the investment consortium that purchased the convertible bond, while the buyer is Jang and any third party designated by him. Securing a CB call option with attractive terms, where the conversion price is one-fourth of the current stock price, is drawing the attention of market participants.
If the call option is exercised, Jang or the designated third party can easily increase their equity stake or reap trading profits. If Action Square maintains its current stock price until the CB conversion period, Jang stands to gain approximately 18 billion won in profits.
According to the Financial Supervisory Service's electronic disclosure system on the 12th, Action Square disclosed a major report regarding its convertible bond issuance decision on the 8th of this month. The disclosure included additional details regarding the call option under the section 'Other matters for investment judgment.'
Action Square announced late last year that it would issue the fourth CB. The issuance target, the ST45 New Technology Investment Consortium, has completed the contribution of 20 billion won in convertible bonds to Action Square. The ST45 New Technology Investment Consortium is an investment group with 20 contributors, with the largest shareholder being Gemopiah and the managing entity being the private equity fund Pectus Company.
Initially, there were no put or call options in this fourth CB. However, according to the disclosure on the 8th, it appears that they were recently added. The seller of the call option is the ST45 New Technology Investment Consortium, and the buyer is Jang or a third party designated by him.
A call option means the right to repurchase at a predetermined option price. If Action Square's stock price continues to rise, those exercising the call option can benefit from capital gains. The conversion price of the fourth CB is 1,008 won, while Action Square's closing price on the 10th was 3,870 won. The current stock price of Action Square has surged by 225.48% compared to the closing price of 1,189 won on December 11 last year, before Jang's joining was announced.
The CB that Jang can acquire when exercising the call option amounts to 10 billion won. According to the disclosure, if Jang exercises the conversion rights obtained through the CB acquired via the call option, he can acquire up to 9,926,634 shares based on the initial conversion price. If the price decreases and a refixing occurs, he can acquire up to 14,164,305 shares.
Based on the number of shares calculated at the initial conversion price, if the stock price remains at the level of the closing price on the 10th until the CB conversion period, Jang will have approximately 38.39 billion won. This means he would gain about 18 billion won in profit. The conversion period for the fourth CB begins on January 8, 2026. At that time, the call option is also expected to be exercisable.
In this disclosure, it also noted that besides Jang, a third party designated by him is listed as the buyer of the call option. This is one of the issues viewed negatively by financial authorities. It is often seen that passing the right to exercise the call option to a third party could be abused for unfair trading in the capital market.
In response, the Financial Services Commission refined the system last year to require specific disclosures about call option exercisers when issuing CBs. Under the revised regulation, if a company designates a call option exerciser or transfers the call option to a third party, it must disclose this through a major report. Although disclosures about call option exercisers were required even before the revision, they were only specified as 'the company or the designated party,' making it difficult for investors to grasp information about the call option exerciser.
However, with the improvement of the system last year, more detailed information must now be disclosed if the call option rights are transferred to a third party. According to the Financial Services Commission, the changed system requires the disclosure of important details such as the designation date of the exerciser, the consideration for designation, and the relationship between the exerciser and the company or largest shareholder through the major report.