CS, a KOSDAQ-listed company that decided on a reverse stock split to shed its status as a "penny stock," has now moved to acquire an unlisted company. The decision is aimed at meeting tougher listing maintenance standards. However, because the target company received a "modified" audit opinion and CS, whose financial condition is weak, must spend a large amount of money, some say the move is excessive.
CS said on the 7th that it signed a contract to acquire 25,400 shares of unlisted Mirae Information Technology for 25 billion won. Founded in 2015, Mirae Information Technology is a small and midsize company that produces CCTV cameras and network switches, with annual sales of about 35 billion won and around 2 billion won in net profit each year. As of last year, total assets stood at 17 billion won.
CS agreed to acquire 100% of the shares held by the largest shareholder of Mirae Information Technology and related parties. It plans to acquire all 25,400 shares for 25 billion won.
CS's move to make a somewhat aggressive bet by injecting funds exceeding the company's total assets (19 billion won) is seen as a self-rescue measure to maintain its listing.
The financial authorities recently announced a plan to delist penny stocks from the KOSDAQ market and decided to gradually raise the sales and market capitalization criteria for maintaining a listing from the current 3 billion won and 15 billion won to 10 billion won and 20 billion won.
CS shares once surged after being grouped as a Lee Jae-myung theme stock because former largest shareholder Chair Jeong Heung-sik graduated from Chung-Ang University's business administration department, but the stock fell below 1,000 won as business slumped. The company then decided to merge shares, changing the 500-won par value to 1,000 won. Following the reverse split decision, trading has been suspended from the 27th of last month to the 19th of this month.
The reverse split lifted the stock out of penny territory, but the company still faces the task of meeting the sales and market cap criteria. Last year's sales exceeded 20 billion won, but revenue has been shrinking each year. Market capitalization is only 30 billion won.
The company said it is pursuing strategic M&A to meet the tougher listing maintenance conditions. It aims to quickly find a company that generates a certain level of sales and profits and has growth potential to shore up its financial weaknesses.
The issue is that while the target company is profitable, CS's urgent situation has led it to make a sizable expenditure. The amount CS will inject to acquire Mirae Information Technology is equivalent to 143% of its equity capital. The company plans to raise acquisition funds through external borrowing and issuing convertible bonds.
On top of that, Mirae Information Technology received a "qualified" opinion from its external auditor on last year's financial statements. Sejeong Accounting Corporation said in Apr. 2025 that, after being appointed as Mirae Information Technology's auditor, it could not attend the inventory count and, even through alternative procedures, could not obtain satisfactory results regarding the company's inventories.
Because inventories affect financial performance and cash flow, the auditor, lacking adequate supporting evidence, issued a modified audit opinion.
An industry official said, "Because CS had to quickly meet listing maintenance requirements and had limited room to maneuver, it inevitably would have been in a disadvantageous position in acquisition talks."
Meanwhile, the company is also considering increasing market capitalization through a paid-in capital increase. The company said it is reviewing a third-party allotment capital increase targeting various investors, including the largest shareholder.