Medical artificial intelligence (AI) corporations VUNO(338220) are moving ahead with a large paid-in capital increase amounting to 45% of the existing number of shares issued, raising concerns about damage to shareholder value. The largest shareholder's subscription participation rate is only about 7% of the allotted quantity, and the equity stake is expected to be diluted to 11%.
The fact that 17.5 billion won previously raised but unused is being operated as financial products, while an additional paid-in capital increase of 31.4 billion won is being pursued, is also heightening investors' doubts.
According to the Financial Supervisory Service's electronic disclosure system on the 31st, VUNO decided after the market closed on the 28th to conduct a paid-in capital increase by way of a rights offering to existing shareholders followed by a public offering of forfeited shares, issuing 6.3 million common shares. The planned issue price is 4,980 won per share, with a total of 31.374 billion won to be raised. The new shares amount to 44.99% of the existing 14,001,823 shares issued.
The stock price swung sharply on the news of the large paid-in capital increase. On the first trading day after the announcement, VUNO's share price plunged 24% on the KOSDAQ market.
The largest shareholder's low subscription participation rate is also a burden. Lee Ye-ha, the representative executive officer and largest shareholder, is allotted 969,199 shares in this paid-in capital increase but plans to subscribe for only about 7% of them. To subscribe for the entire allotment, about 4.827 billion won would need to be prepared based on the planned issue price, and the company said it set the subscription size at around 7% in consideration of the funding burden.
VUNO said, "The shares held by Representative Executive Officer Lee Ye-ha constitute core equity for maintaining management control," and added, "If these are used as collateral to raise funds for subscription participation, not only would the individual's financial burden increase due to higher interest costs, but a margin call could occur if the stock price falls, raising concerns that the very status of the largest shareholder could be threatened." Lee plans to sell the rights offering warrants corresponding to the unsubscribed portion to raise subscription funds.
As a result, the combined equity stake of Lee and related parties could fall from the current 15.59% to 11.09% after the paid-in capital increase. Reflecting the potential exercise of the conversion rights of the perpetual convertible bonds going forward, it could drop further to 10.09%.
The company sees little immediate possibility of a change in management control. A VUNO official said, "There is no shareholder other than the largest shareholder who holds an equity stake of 5% or more of the total number of shares issued, and equity is dispersed among minority shareholders, so we judge that the likelihood of any restriction on management control arising at this point is low."
It also stands out that funds previously raised remain. VUNO is operating 17.535 billion won of the 69.129 billion won raised through private placements as financial products without using it yet. In particular, the entire 10 billion won of the 5th perpetual convertible bonds issued in Feb. for operating funds remains unused.
By contrast, 20 billion won of the 31.374 billion won to be raised through this paid-in capital increase will be used first to repay principal and interest on the 3rd perpetual convertible bonds. The remainder will be allocated to research and development expenses, sales and marketing expenses, and operating expenses of overseas subsidiaries.
Through a letter to shareholders, Lee said, "Since the interest rate on the 3rd perpetual convertible bonds will be gradually increased from the interest rate adjustment date in Dec. 2026, we judged that it is optimal to respond preemptively before that point," and added, "We judged that a public paid-in capital increase, which can directly strengthen capital without potential interest or repayment burdens and thereby reinforce our financial structure, is the most rational choice."
Earlier, VUNO changed the use of the 10 billion won raised through the 4th perpetual convertible bonds from operating funds to debt repayment funds, and on the 26th used 9.342 billion won to repay the 2nd perpetual convertible bonds. In effect, there is precedent for repaying perpetual bonds by changing the use of previously raised funds.
A VUNO official explained, "The change in the use of the 4th tranche funds was an exceptional and limited measure to block, before submitting the securities registration statement, the possibility of expanded dilution due to the adjustment of the conversion price of the 2nd tranche perpetual convertible bonds."
Worsening results and cash flow are also behind the company's move to leave 17.5 billion won of previously raised funds for operating use. In the first half of this year, VUNO's consolidation sales were 12.16 billion won, down 27.6% from a year earlier, and the operating loss widened from 3.6 billion won to 8.3 billion won. The net loss also increased from 4.1 billion won to 9.4 billion won.
Cash flow from operating activities was negative 7.1 billion won, with cash outflows increasing 224.3% from 2.2 billion won a year earlier. It has already exceeded last year's annual outflow of 4.7 billion won.