Investors in L&C BIO's convertible bonds (CB) are looking to realize profits at the last minute, just three days before the conversion request deadline. With stock prices skyrocketing this month, investors who hesitated to convert for three years now have a final opportunity for "taking profit". However, as the stock price rose solely on expectations rather than performance, the burden of CB volume has added, causing the stock price to drop nearly 14% on the 27th.
According to the Financial Supervisory Service's electronic disclosure system on the 27th, L&C BIO announced on the 26th that 10 billion won of the 60 billion won second tranche of CB was converted. The number of new shares to be issued from this conversion request will be 417,710 shares, with the listing date scheduled for June 9.
Previously, L&C BIO issued the second tranche of CB worth 60 billion won in June 2022 to a consortium led by Ascent and Meritz. Both the nominal and maturity interest rates are 0%, meaning investors will only get their principal back if the stock price does not exceed the conversion price. Since the issuance of the CB, as the stock price fell, the conversion price has repeatedly gone through readjustments, dropping from the initial 34,200 won to the lower limit of 23,940 won.
As the stock price remained below or slightly above the conversion price for a long time, CB investors have delayed their conversion requests. With three years having passed since the acquisition of the CB and the maturity date (June 29) approaching, the mood has essentially turned into one of "holding on" until maturity.
However, the recent launch of the skin booster "Elabie Rituo" by L&C BIO has led to a surge in stock prices, with expectations that it will become the second "Rejuran". After staying in the 22,000 won range at the end of last month, the stock price has risen to the 32,000 won range based on the previous day's closing, marking a 45.9% increase this month alone.
With just three days left until the deadline for converting bonds into shares, as the stock price rises above the conversion price, investors are moving forward with the CB conversion requests. The conversion request deadline is the 29th of this month, meaning that this is essentially the last opportunity to realize profits.
However, the stock price, which had surged on expectations rather than actual performance, turned downward due to concerns over a large CB volume release. After a disclosure regarding CB conversion requests came out after the market closed the previous day, the stock price plummeted by 14.5% at one point during the day. The closing price for the day was 27,950 won, down 13.7% from the previous day. Considering the conversion price of 23,940 won, the potential for profit-taking has become quite precarious.
Approximately 2.08 million shares (worth 50 billion won) of convertible volume remain from the second tranche of CB, and the possibility of an overhang is likely to continue to weigh on the stock price until the conversion request deadline on the 29th.
Meanwhile, L&C BIO issued an additional 60 billion won of the third tranche of CB in April to NAU IB Capital to secure resources for repaying the second tranche of CB.
On the 23rd of this month, a disclosure was made regarding the exercise period for the 9th sell option for the second tranche of CB, and on the previous day (26th), the largest shareholder, Lee Hwan-cheol, exercised the call option to directly buy some CB and took steps to defend against dominance and ease the overhang burden. On the same day, the Ascent-Meritz consortium exercised the conversion rights amounting to 10 billion won.