PICOGRAM, a KOSDAQ-listed company, has faced liquidity concerns after more than three years since its initial public offering. The water purifier filter company entered the cosmetics business two years ago but has not achieved significant results. The exercise of the put option on the convertible bonds (CBs) issued to secure operating funds is continuing, making additional fundraising unavoidable.
The company stated that it can address any remaining CBs with internal funds even if a put option request is made in April. It also noted that from this year, it will focus on the food waste disposal business that started last year to recover its performance.
According to the Korea Exchange on the 10th, PICOGRAM received a put option request from investors of the first convertible bond on the 4th of this month and repaid 12 billion won. PICOGRAM issued a first-phase CB worth 20 billion won in August 2023 to secure operational and facility funds.
At that time, a total of seven securities companies and asset managers underwrote it, with some corporations exercising their first put option requests as soon as the period began last month. This repayment amount accounts for 58% of the total issuance. Life Asset Management, which underwrote 6.5 billion won, is also among the companies that exercised the put option. Life Asset Management, known for value investing, purchased the most CBs among the investors.
Listed in November 2021, PICOGRAM's stock price surged 170% within a year due to expectations of a booming water purifier rental market and overseas expansion. The development of a filter for cesium purification drew significant attention, tying it to nuclear power theme stocks. However, the stock price has since declined. As of the 7th of this month (2,500 won), it has fallen nearly 90% from its peak after listing (21,450 won). It has dropped 44% over the past year.
The conversion price of the first-phase CB is 5,110 won, and there is a high possibility that the remaining CBs worth 8.4 billion won will be claimed in April. The company must arrange funds by May 4th if a put option request comes in for the remaining CBs. With cash and cash equivalents totaling only 11.4 billion won as of the third quarter of last year, after deducting the current CB repayment amount, there is nothing left, making additional fund acquisition essential. There are discussions about the possibility of issuing more CBs or conducting a paid-in capital increase.
A PICOGRAM official noted, "The issuance of additional CBs is a matter that needs to be considered in the future, but currently, there are no issues operating the company," adding, "There are funds available in our securities accounts and elsewhere to address the remaining CB repayment."
In 2023, PICOGRAM made a significant move by acquiring a 12.7% stake in the beauty and healthcare company Igel for 3 billion won, marking the start of its business expansion. In September of last year, it also entered the food waste disposal market. However, its performance dropped sharply, with operating profit falling from 3.5 billion won in 2022 to 1.5 billion won in 2023. In the third quarter of last year, quarterly operating profit plummeted to 25 million won, resulting in a net loss of 1.1 billion won.
In the securities industry, analysts believe that expanding food waste disposal sales this year is crucial for performance recovery. Kim Tae-hyun, a researcher at IBK Securities, stated, "Large corporations such as LG Electronics and Samsung Electronics are planning to enter the food waste disposal market, which will intensify competition," adding, "The expected sales for this year are estimated at 1 billion to 1.5 billion won, and an increase in expenses for marketing and other efforts to establish a foothold in the market is unavoidable."
Individual investors are expressing concerns that the put option claims on the CBs signal a lack of future stock price appreciation. Some investors pointed out that if the remaining CBs are also recovered, the stock could plummet to a "penny stock" (a stock priced below 1,000 won). According to NH Investment & Securities, 99.35% of PICOGRAM investors have incurred losses, with an average rate of return reaching minus (-) 58.83%.
A company official remarked, "The operating profit in the third quarter of last year decreased due to the backlog of orders being pushed into the fourth quarter, but there are no significant issues on an annual basis compared to the previous year." They continued, "This year, in terms of the food waste disposal business, we expect to sell under our brand on Amazon in the U.S. during the first half, and we are also working on sales strategies through Original Design Manufacturing (ODM) and Original Equipment Manufacturing (OEM) with overseas clients and manufacturers."