Barunson E&A, the production company behind the film "Parasite," carried out a 4-to-1 free capital reduction but still faces possible delisting. It has been designated as an issue under management for 24 trading days due to insufficient market capitalization, and if its market cap remains below 20 billion won for 21 more consecutive trading days, it will become subject to delisting. Minority shareholders are strongly pushing back, saying management has no intention of supporting the share price.
According to disclosures from the Korea Exchange (KRX) on the 9th, Barunson E&A(035620) was designated as an issue under management on the 6th of last month due to insufficient market capitalization. On the 13th of last month, an additional issue-under-management reason was added for being a "penny stock," as the share price was below 1,000 won.
Since being designated as an issue under management, Barunson E&A's market capitalization has shrunk from the 15 billion won range to the 13 billion won range. For 23 consecutive trading days since the designation, it has remained below 20 billion won.
If the market capitalization fails to reach 20 billion won for 45 consecutive trading days within 90 days after the issue-under-management designation, it becomes subject to automatic delisting. Accordingly, if it stays below 20 billion won for 21 more consecutive trading days, the delisting process will begin.
Earlier, on Apr. 4, Barunson E&A attempted to support the share price by carrying out a 4-to-1 free capital reduction, but it saw no effect. Before the reduction, the stock was in the 200-won range; immediately after, it briefly rose to the 1,000-won range, but it turned downward in mid-June and is now staying in the 600-won range.
Given the situation, only minority shareholders are growing anxious. As of the end of June, Barunson E&A's minority shareholders held 68% of the company's total equity.
In particular, minority shareholders take issue with Barunson E&A's price-to-book ratio (PBR) being around 0.2 times. A PBR of 0.2 times means the company's market capitalization is only about 20% of its book net assets (capital). In effect, the stock is trading at an 80% discount to what shareholders could receive if the company were liquidated and distributed right now.
According to Barunson E&A's recently disclosed semiannual report, the company had total capital of 60.6 billion won in the first half of this year. It also holds about 3.8 billion won in cash and cash equivalents, about 5.6 billion won in equity securities at fair value, and an investment property in Hannam-dong, Seoul, appraised (fair value) at about 104.37 billion won.
Minority shareholders are even raising suspicions of deliberate delisting. They say that despite the delisting risk, management is not showing any will to support the share price.
The minority shareholders said they are "rallying equity and exploring legal responses such as a request to inspect accounting books against management and a complaint for breach of trust under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes, and we will not rule out a full-scale offline public campaign, including solo protests in front of headquarters."