Sonid, a KOSDAQ-listed company struggling with a cash crunch, appears to have been subject to forced liquidation for a significant portion of the listed-company equity it held for investment purposes. Sonid had issued convertible bonds to raise funds in the past, providing the listed shares it held as collateral, but the collateral rights were enforced as share prices plunged.
As a result, just two years after issuing convertible bonds to raise funds, it lost most of the assets provided as collateral. Considering the prices of the investment assets at the time the convertible bonds were issued, Sonid's losses are estimated to be substantial.
Sonid's business environment has hardly improved, leaving it stuck in a vicious cycle of falling share prices and worsening cash shortages. The company has posted operating losses every year since 2021.
Sonid disclosed that after forced liquidation occurred last year for the common shares of CytoGen it held, it recently sold the remaining volume on the market. The shares were assets provided as collateral, along with stock of other listed companies such as MEDICOX, KRM, and Sangsangin, when the company issued 10 billion won in convertible bonds to Sangsangin Savings Bank and Sangsangin Plus Savings Bank in Sep. 2023 to secure operating funds.
However, as Sonid's share price recently plunged, the collateral rights over the collateral provided were enforced two years after it raised funds by issuing convertible bonds. Sonid's stock has been on a steady decline and has fallen to penny-stock levels. It was in the 1,200-won range a year ago, but now it is around 360 won.
After part of the CytoGen equity was liquidated by force, the company sold the remaining volume. According to the disclosure, of the 780,000 CytoGen common shares the company provided as collateral, a little over 18,000 shares were force-sold through enforcement of collateral rights, and the remaining volume was sold by the company on the market from July to September. Regarding this, the company said, "We plan to use the funds secured by disposing of the equity appropriately for debt repayment and other purposes."
The company said it bought these listed-company shares for investment purposes. Expecting favorable share-price prospects, it decided to provide them as collateral and issue convertible bonds rather than sell them on the market. Contrary to expectations, however, the listed stocks fell sharply, eventually dropping to a level that prompted Sangsangin Savings Bank to enforce the collateral rights. Sonid failed to earn investment gains and ended up suffering significant losses after providing the shares as collateral and being liquidated through forced selling.
Selling the remaining CytoGen equity is also expected to result in large losses. The company bought CytoGen shares in 2023, but the current price has fallen to about 20% of its level two years ago.
Regarding this, the company explained, "Since the recent change in the largest shareholder, the new management has been selling noncore assets to improve the financial structure." In March this year, Sonid changed its largest shareholder through a third-party allotment capital increase. The current largest shareholder is MH Tech, which holds 20.74%.
After becoming the owner of the company, the new management decided on a free capital reduction. It will consolidate 10 common shares into one; once the reduction is completed, capital will decrease from 36.9 billion won to 3.7 billion won. This is a measure to resolve 78 billion won in accumulated deficits. In a letter to shareholders, the company said, "We will improve the financial structure through a free capital reduction and push ahead with business restructuring."