"I saw that the balloon color was blue (indicating a decline)." (Yellow Balloon Tour individual investor)
As the government decided to allow visa-free entry for group tourists from China, travel stocks are strong, but the stock price of Yellow Balloon Tour has stalled. This is due to concerns over an overhang as the exercise of the conversion claim for convertible bonds (CB) issued by Yellow Balloon Tour has been occurring one after another.
Yellow Balloon Tour shares traded at 6,120 won on the KOSDAQ market at 10:07 a.m. on the 13th, down 3.32% (210 won) from the previous day. At the same time, Modetour Network and RedcapTour were experiencing slight gains while Very Good Tour was in a slightly weaker position.
The relative decline of Yellow Balloon Tour is believed to be influenced by the CB conversion claims. Yellow Balloon Tour announced that the conversion claim for 2 billion won of the 3rd CB was exercised the previous day. This follows the exercise of a 1 billion won conversion claim on the 7th, just five days earlier. A total of 581,056 shares will be listed on the 28th and the 2nd of next month, based on a conversion price of 5,163 won. If the current stock price is maintained until the listing, the yield could be in the 18% range, making immediate selling possible.
Yellow Balloon Tour issued the 3rd CB worth 15 billion won in July last year. The private equity management firm VCM's 'VCM Growth No. 1 Private Equity Fund' acquired it. VCM Growth No. 1 Private Equity Fund is controlled by Korea Development Bank Capital, which holds a 18.8% stake.
Coincidentally, the timing for exercising conversion claims, which can occur a year after the issuance of CB, coincided with the rebound of Yellow Balloon Tour's stock price. This was because the government announced that visa-free entry for Chinese group tourists would be permitted from the 29th of next month until June 30, 2026, causing travel stocks to surge.
Yellow Balloon Tour's stock price rose from around 5,000 won to peak at 7,070 won during trading on the 6th, when the government announcement was made. This was the first time Yellow Balloon Tour's stock price exceeded the 7,000 won mark since November last year when China temporarily implemented visa-free entry for South Koreans for 30 days.
Although Yellow Balloon Tour still shows the highest stock price increase among travel stocks in terms of stock price growth this month, individual investors are expressing dissatisfaction. This is partly due to the suspension of upward momentum following the announcement of the conversion claim, but also because many investors have been 'stuck' for a long time.
The stock price of Yellow Balloon Tour has drawn a long-term downward curve from its peak of 21,450 won on July 2, 2021, when it conducted a bonus issue of two shares for every one. The average purchase price of 2,233 Yellow Balloon Tour investors linked to the Naver Pay 'My Asset' service is 10,625 won. The average evaluation loss rate exceeds 42%. According to data from NH Investment & Securities customers, as of the 11th, the average evaluation loss rate still exceeds 42%, with the proportion of loss-making investors reaching 94.8%.
The issue is that there are still many CB amounts that can be converted into shares. In particular, when Yellow Balloon Tour first procured the 3rd CB, the conversion price was 6,670 won, but due to the decline in stock prices, the conversion price was adjusted to 5,163 won in February this year. This means that more shares can be converted.
If all 15 billion won of the 3rd CB is converted to shares, it would amount to 2,905,287 shares. Even excluding the amount for which conversion claims have been exercised, there remain 2,324,231 shares. This accounts for 14.7% of the current circulating shares of Yellow Balloon Tour.