ABL Bio is facing concerns over 'overhang' as the time to convert the issued convertible preferred stock (CPS) into common stock approaches to secure research and development (R&D) funds. This is because the profit margin based on the current stock price exceeds 150%. ABL Bio stated that it would negotiate to minimize the stock price impact.
According to the Korea Exchange, ABL Bio shares closed at 62,800 won in the KOSDAQ market on the 4th. The stock price fell by 11.17% (7,900 won) from the previous day. The drop of over 7,000 won in ABL Bio's stock price in just one day is the first since its listing in December 2018.
The sharp decline in ABL Bio's stock price can be attributed to the uncertainty surrounding the U.S. tariff policy, which has negatively affected the domestic stock market, but it is also interpreted as a significant concern over the overhang.
ABL Bio conducted a third-party allocated paid-in capital increase last July to secure funds for the development of next-generation antibody-drug conjugates (ADCs). The plan was to issue 5,778,196 shares of convertible preferred stock at 24,220 won per share, raising approximately 140 billion won.
Korea Development Bank (KDB), Atinum Investment, InterVest, Hana Financial Group, and Company K Partners participated. They can convert the preferred stock into common stock starting from the 12th of this month, one year after issuance. Since the initial conversion price is the same as the issuing price (24,229 won), the market sees a high possibility of converting the stocks for a profit.
Based on the current stock price, ABL Bio can see a profit of 38,571 won per share. The one-year return on investment has reached 158.4%. For example, KDB holds 2,063,642 shares of ABL Bio's convertible preferred stock, with current estimated profits of approximately 79.6 billion won.
The issue is that if all of ABL Bio's convertible preferred stock is converted into common stock, the stock value is bound to be diluted. If all preferred shares are requested for conversion, the number of shares will increase by about 11.96%.
As ABL Bio's stock price plummeted, it emphasized on the 4th, 'There is no need to worry about convertible preferred stock that can be converted soon.' It also stated, 'We will negotiate well with stakeholders to ensure that there is no impact on the stock price,' adding, 'The company's ongoing projects are proceeding more smoothly than ever in all areas.'