As KOAS was grouped as a theme stock related to "APEC 2025" and its share price surged in a short period, concerns about an overhang (potential sell orders) are growing as a large volume of new shares amounting to 2.5 times the existing number of shares is scheduled to be listed on the 21st. In particular, the market notes that since the share price fell for more than three months and then rebounded sharply in just two weeks, there is a possibility that profit-taking sales will pour out all at once.
According to the Korea Exchange (KRX) on the 17th, KOAS shares have jumped recently after news spread that the company sponsored its chair "Maruon" for the 2025 APEC summit. The share price, which was 3,360 won on the 30th of last month, soared for three consecutive trading days on the 31st (20.24%), Nov. 3 (28.22%), and Nov. 4 (10.42%), nearly doubling from before the APEC issue, and traded at 6,170 won as of the 17th.
KOAS, which had been extending its gains, fell 2% on the day after news broke that it would list a large volume of new shares. KOAS disclosed that on the 21st it will newly list 8,108,823 shares, exceeding 246% of the current number of issued shares (3,290,720). This volume is the result of concentrated exercises of rights for the 5th, 6th, and 7th convertible bonds (CB) and the 4th bonds with warrants (BW) from Sept. 11 to Oct. 17.
A CB is a bond with the right to convert the bond into shares, and a BW is a bond with the right to purchase new shares at a predetermined price. When the bondholder exercises these rights, the holder can acquire shares at the set conversion price. Generally, rights are exercised when the share price is higher than the conversion price, and in this case, the holder can earn a profit equal to the share price minus the conversion price.
The conversion price of the newly listed shares is all 4,293 won. This price is lower than the closing price (6,170 won) on the day. Therefore, if bondholders sell the new shares on the market, they can realize a price gain of about 2,000 won per share. There is a suggestion that large volumes of sell orders for profit-taking could pour out all at once.
When the number of shares increases, equity stakes are diluted and selling pressure rises, increasing the likelihood of a share price decline. In fact, when KOSDAQ-listed Fino's CB worth 68.5 billion won (198%) was requested to be converted into shares on July 18, Fino's share price fell about 17.85% over a month. The new listing volume for KOAS is an even larger 246% than in the Fino case, leading to analysis in the market that the impact on the share price will be much greater.
If bondholders judge the current share price rise to be temporary, large-scale selling could occur before the price falls. KOAS shares hit 14,650 won intraday in Aug., then continued a decline for three consecutive months, only recently achieving a short-term rebound on the APEC issue.
Behind the three-month decline in KOAS shares is a string of failed mergers and acquisitions (M&A). In Aug., KOAS sought to secure growth drivers by trying to acquire equity in the biotech company Novelty Nobility. However, the plan fell through when a paid-in capital increase agenda was voted down by the board due to opposition from Novelty Nobility shareholders.
Afterward, it announced it would acquire equity in Ehwa Technologies Information and ETRON, affiliates of Ewha Group. It planned to invest about 18 billion won to secure 34.02% equity in Ehwa Technologies Information and 11.36% equity in ETRON, respectively, but the acquisition is facing difficulties as Ewha Group is countering by securing additional equity.
Earnings are also declining. In the third quarter of this year, KOAS posted sales of 12 billion won and an operating loss of 2.5 billion won. Sales fell 32.6% from the same period a year earlier (17.8 billion won), and operating profit turned to a loss.
Kim Beom-jun, a professor in the Department of Accounting at Catholic University, said, "There are concerns about an overhang because the number of newly issued shares is high compared to the existing number of shares," and added, "If there is a possibility that the share price will continue to rise, investors are more likely to hold shares, and if they judge that the share price is likely to fall, they are more likely to sell."
A KOAS official said, "Comments related to an overhang could unnecessarily affect the market, so we will not comment specifically."