KOSPI-listed Inscobee has drawn market interest by announcing a new business focused on the development of local currency based on the Korean won stablecoin. Inscobee has struggled with chronic losses but has previously announced plans to invest in emerging fields such as bio and smart grid.
During the SIM card crisis from SK Telecom, it was also identified as a SIM card thematic stock. Each time, the stock price fluctuated considerably, but there are criticisms that the outcomes have been unsatisfactory.
Inscobee recently announced that it has signed a memorandum of understanding (MOU) for the development of next-generation local currency based on stablecoins with blockchain corporations Parameta and Web3 Solutions. Among these, it was reported that Inscobee has concluded a formal contract with Parameta, with plans to start technology development by January next year.
With the official launch of the Lee Jae-myung government, discussions for the institutionalization of the Korean won stablecoin have intensified, linking Inscobee as a policy thematic stock. By May, its stock price skyrocketed from the 1,300 won range to 1,790 won on the 13th of this month, showing an increase of over 30%. On the 12th, it even reached 2,175 won at one point.
Some interpret that Inscobee's recent announcement of a new business serves as a measure to buoy its stock price in preparation for potential exercise of put options (sell rights) and conversion claims for convertible bonds (CB).
Since last year, Inscobee has repeatedly issued convertible bonds (CB) in the total amount of 25 billion won for the 32nd to 37th series, and in April this year, it conducted a capital increase worth 1 billion won targeting KB Securities, thereby implementing large-scale fundraising. The funds have been used for acquiring equity in medical device manufacturer Cellumed, debt repayment, and operational expenses.
This February, it became possible to exercise the put option for the 32nd series CB worth 12 billion won, and the exercise period for the 35th series CB worth 1 billion won will arrive in November. The conversion prices for the two CBs are 1,301 won and 1,503 won per share, respectively.
In particular, the 32nd series CB issued to Sangsangin Investment & Securities has 10.2 billion won remaining, excluding what was acquired before maturity, and it has provided 70% equity of its most profitable subsidiary, Pretelecom, as collateral. From Inscobee's perspective, it must maintain the stock price above a certain level to avoid burden in preparation for monthly early repayments starting from February of this year.
The exercise claims for the 33rd and 34th series CB worth 4.6 billion won each without options will also become available starting from August and October this year, respectively. The conversion prices for the two CBs are lower than the current stock price at 990 won and 1,275 won per share, which may lead to a potential drop if large volumes are released into the market all at once. The company has also provided 5.36 million shares of Cellumed as collateral for the 2.8 billion won borrowed by Pretelecom from Sangsangin Savings Bank, and the maturity was extended until August 24 last month.
Inscobee has posted operating losses every year since 2020, excluding 2023. In the first quarter of this year, it recorded an operating loss of 200 million won and a net loss of 19.9 billion won. During the same period, the accumulated deficit stood at 113.1 billion won, indicating a state of capital erosion.
The company currently secures liquidity through short-term funding such as CB; however, the risk of complete capital erosion could increase in case of further losses or large-scale repayments. The accounting auditor has also stated that there is significant uncertainty related to the going concern of Inscobee due to excessive current liabilities and ongoing operating losses since 2023.
93.3% of Inscobee's revenue comes from mobile virtual network operator (MVNO) services. The contributions from new businesses such as smart grid (0.2%) and cosmetics and health products (6%) are minimal.
In regards to the 8.8 billion won lent to its subsidiaries, bio companies Apimeds, its U.S. subsidiary, and BigBio, the company has set up a full allowance for bad debts, leaving the recovery of investments uncertain. In this regard, the company noted, "As Apimeds' U.S. subsidiary was listed on the New York Stock Exchange last month, we expect that once the performances start coming in, they will be accounted receivable again."
Meanwhile, the largest shareholder of the company, Millennium Holdings, where CEO Yoo Insu (33.6%) is the largest shareholder, and Lee Kang-taek (30.8%) serves as the CEO, is the brother of Lee Kang-rae, who previously served as the president of the Korea Expressway Corporation and a former member of the Democratic Party of Korea. Another brother, Lee Kang-jae, is working as a non-executive director for management support at Inscobee.
A representative of Inscobee stated, "While some CB conversion claims have been made, there are no significant issues regarding funds," adding, "We maintain amicable relations with CB bondholders and foresee no problems in the future."