It is a marginal loss company. No credit rating. However, the publication rate is zero. Funds are raised through a private placement method where only certain people can participate. Investors line up. The Legoland crisis has frozen the money market, but this place is a windless zone. It is related to the KOSDAQ (CB) convertible bond issuance market.
The money raised by issuing CBs is used for corporate mergers and acquisitions (M&A). M&A is a theme and stock prices fluctuate. This is a typical example of uncapitalized M&A being repeated in the KOSDAQ market these days. M&A is just a tool, but the essence is a ‘money game’.
Non-capital M&A using convertible bonds of companies listed on the KOSDAQ market eats away at the capital market. The Ssangbangwool Group, KH Group, Edison Motors, and Vident, all of which are under investigation by the prosecution, used the same method. They converted the ‘CB Factory’ and established their own kingdom. The Financial Supervisory Service calls KOSDAQ companies ‘CB printing factories’. In the process, everyone learned that CB investors make a lot of money. If you take over CB and wait a year, the stock price often rises in time for a theme. At that point, the CB is converted into stock and sold in the market. This is the background to the appearance of ‘Chairman Shinheung’.
They become lovers of famous actresses and provide lobbying money to politicians. They even gave North Korea dollars.
Non-capital M&A is currently underway. Hydrolithium (formerly Korea SE), a KOSDAQ company, was acquired by a new company, Lithium Plus, and its stock price jumped almost 15 times in two to three months. WI, a KOSDAQ company bought by Lithium Insight, a sister company to Lithium Plus, also jumped more than four times. As they serially hand out CBs to each other, M&A without capital is biting their tails.
There are no entrepreneurs, just dubious nouveau riche people who appear one after another. There is also a strong suspicion of a power-type money game. Prosecutors and politicians also appear. When the money game is over, the stock price drops by 1/10, and chasing and buying ants tend to suffer huge losses.
But he is helpless. As the financial authorities neglected this abnormality for a long time, the boundaries were blurred in many places. Securities firms, private equity funds (PEFs), and even venture firms are getting into the money game. The damage is entirely the responsibility of the good investor.
The Korea Economic Daily is launching a planning series that analyzes new money games in detail to create a robust capital market.
This year’s 20-fold surge for lithium-themed LEDs is also this approach … “Rotate CB factory and conduct M&A without capital”
(1) The secret of the upcoming corporate hunters who set up ‘their own kingdom’
In the past, mergers and acquisitions (M&A) without capital were completely ignorant. A gangster uses the Myeongdong bonds to take over control of the KOSDAQ company and then embezzles the company’s money. After that, it was a way to ‘eat and run’ by raising the stock price. That was until the mid-2010s.
It’s different these days. There are no gangsters and loan sharks. Instead, Chairman Shinheung and ‘great hands’ appear. bring it to the institutional level. He also obtains advice on corporate finance (IB) from law firms and accountancy firms as well as securities firms. It does not end as a one-off event. Octopus foot M&A is essential. Listed companies are constantly acquiring listed companies. Burn money in theme industries with high market expectations.
The real bullets are convertible bond (CB). The big players bury their money in CB for over a year. After that, they create a theme through M&A and exit when the stock price increases. There is no business entity at all. No embezzlement. However, he does not place much importance on business management. This is because everyone is only interested in ‘ash rice’ (money game).
New uncapitalized M&A after stock price surge
Korea SE, a KOSDAQ-listed company, was originally a swing bridge manufacturer. WI was a semiconductor equipment company, but in recent years has sold mobile phone accessories. Two companies that had nothing to do with each other suddenly became lithium companies. KoreaSE recently changed its name to Hydrolithium, and WI is in the process of changing its name to Urban Lithium. This is after lithium plus, a manufacturer of lithium hydroxide, and lithium insight, a related patent company, each took over control rights.
Lithium Plus and Lithium Insight were just established last year. The capital is only tens of thousands of gain to hundreds of millions. Both were founded by CEO Jeon Woong, who oversaw lithium research at POSCO. He resigned in 2016 when allegations of false reporting on the development of lithium technology were raised. After that, he went on trial for leaking trade secrets, and when he was found not guilty in the first trial in June last year, he founded the company.
After establishment, the two companies raised about 30 billion won each. With that money, he bought Hydrolithium and WI. More unusual is the person who financed the acquisition. The person who lent the money to acquire WI to Lithium Insight is CEO Byeon Ik-seong, WI’s current largest shareholder. At the same time, WI lent to LithiumPlus to finance the acquisition of Hydrolithium. As a result, a complex governance structure of ‘President Byeon→Lithium Insight→WI→Lithium Plus→Hydrolithium’ was created.
The two listed companies raise more than 180 billion won. Most of them are published by CB. As the stock price rises on the lithium theme, CB investors anticipate a ‘super hit’. Within two to three months, hydrolithium’s share price jumped almost 15 times from the range of 2,000 won to 28,350 won (closed on the 21st). The Women’s Institute stock price also jumped from 800 won to 3,900 won.
Lee Jae-myeong camp, the background of the prosecutor’s office
What makes M&A without capital different from the past is the characters. A large number of prosecutors and politicians appear. Former chairman Jang Young-joon, who was a former executive of the Confederation of Korean Trade Unions and was in Lee Jae-myeong’s camp during the last presidential election, is called the chairman of Lithium Plus. He is the person who served as the executive chairman of the Special Committee on the Basic Economy, an all-business meeting that supports candidate Lee Jae-myung, just before the presidential election in January this year. Last year, he served as the executive chairman of the Financial Innovation Committee under the Democratic Peace Plaza, an organization outside the Democratic Party’s elections. A few months ago, he served as chairman of JC Partners, a private equity fund (PEF). On his business card, it is written that he is the general manager of the lithium and lithium business. He drew a line, saying, “I’m an early investor in Lithium Plus, not the chairman.”
Several former prosecutors also appear. Kim Kyung-joon, co-CEO of Lithium Plus and director of Lithium Insight, is a former prosecutor’s office investigator.
The largest shareholder (40%) of the Rachnaga Association, an investment association that ended up sitting in the ‘money cushion’ as WI, is also Chairman Lee Seong-rak, a former prosecutor’s officer. WI drove a value of 5.7 billion CBs (conversion price of 1160 won), acquired 1 billion new shares (1675 won per share) and 980,000 old shares (1200 won per share) without a security deposit to Rachnaga Society and the Chairman Lee. The union and Chairman Lee are making a profit of about 20 billion won based on the current share price.
Complex ‘Don’t Ask M&A’
In order to make a lot of money through M&A without capital, it is necessary to issue as many CBs as possible. This is why the M&A octopus foot, which bites tail after tail, is essential. Chairman Kang Jong-hyun, suspected of being the real owner of Bithumb, also made a lot of money through CB’s investment in the process of creating a revolving share structure leading to ‘Bucket Studio → Inbiogen → Vident ‘. Since August 2020, when Chairman Kang’s family appeared, the amount of CB and guaranteed bonds (BW) issued by the three listed companies reached 510 billion. Including convertible preferred stocks, it reaches 791.3 billion won.
Various non-capital M&A ‘projects’ are often intertwined. Investors and ‘players’ overlap. For example, if you trace back EV Advanced Materials, which invested 5 billion won in Lithium Plus, the pyramid structure of ‘SL Bionics → Studio Santa Claus → Nexton Bio → EV Advanced Materials → Dynamic Design’ will be revealed . All are listed companies. JH Investment Association No. 1, which appears to be a major investor in Hydrolithium and WI, also invested in Dynamic Design CB last month.
Reporters Jinhyung Cho and Donghun Lee u2@hankyung.com
