Sangji Construction, which has been linked to Lee Jae-myung, the former leader of the Democratic Party of Korea, saw its stock price soar 18 times this month but suddenly fell to the lower limit. This is because a large number of convertible bonds (CB) were converted into shares, diluting the equity value of existing shareholders.
According to the financial investment industry on the 20th, Sangji Construction went straight to the lower limit in after-hours trading following the market close on the 18th.
Sangji Construction is well known for its luxury dwellings "Sangji Kai Room" and has recently gained attention as a significant political theme stock. This is partly due to the fact that Lim Moo-young, who served as an outside director at Sangji Construction, was involved in Lee Jae-myung's campaign during the last presidential election.
However, the former director Lim's term expired in March of last year, and he currently has no relationship with Sangji Construction. When the Korea Exchange requested an inquiry regarding significant market fluctuations in July, the company responded that it had "no important information to disclose separately."
The stock price of Sangji Construction skyrocketed since the beginning of this month. The stock price, which was only in the low 3,000 won range on the 1st, rose five times to the mid-15,000 won range on the 9th and briefly soared to 56,400 won during trading on the 18th. It surged more than 18 times in just 17 days.
The factor that held back the soaring stock price was the CB. After the market closed on the 18th, Sangji Construction announced that the conversion rights of the "20th unidentified type, non-guaranteed private convertible bonds" were exercised, leading to the issuance of 2.3 million new shares. This represents 57.76% of the total number of issued shares (3,981,814 shares). The conversion price is 5,000 won, and the redemption amount is 11.5 billion won. The new shares are scheduled to be listed on May 22.
Earlier, in November 2023, Sangji Construction had purchased bonds worth 13.2 billion won. The maturity date of the bonds was scheduled for September 23, but on the 4th of this month, it sold them for 15.3 billion won to Youngpa, "Global No. 1 Cooperative," MJ&Li, and "TDAM Investment Cooperative No. 1." Among the bond buyers, TDAM Investment Cooperative No. 1 is a subsidiary in which MJ&Li holds a 77% equity stake.
With nearly 60% of the total number of shares being newly issued ahead of the listing, investor sentiment toward Sangji Construction is expected to deteriorate significantly. On the 18th, Sangji Construction's closing price was 38,050 won, down 12.33% from the previous trading day.