Sonid Loses Collateral Shares as Stocks Plunge

It has been revealed that Sonid, a KOSDAQ-listed company struggling with financial difficulties, has had all of its shares in listed compani...

It has been revealed that Sonid, a KOSDAQ-listed company struggling with financial difficulties, has had all of its shares in listed companies, held for investment purposes, subject to forced sales. Sonid had previously issued convertible bonds to raise funds, pledging its shares in listed companies as collateral. However, the recent sharp decline in stock prices led to the execution of the collateral rights.

As a result, within two years of issuing the convertible bonds to secure funds, the company lost all the assets it had provided as collateral. Given the prices of its investment assets at the time of the convertible bond issuance, Sonid’s losses are estimated to be significant. It is now believed that selling the shares on the market at the time would have been a better decision.

Sonid continues to face a vicious cycle of declining stock prices and worsening financial difficulties due to its persistently poor business environment. The company has reported annual operating losses since 2021. Amid this, concerns among shareholders are growing as the new largest shareholder, who recently took control, is reportedly linked to past stock price manipulation involving Samtoogun.

Sonid recently disclosed that forced sales occurred for its holdings in Cytogen common shares. These shares, along with those of Medicovacs, KRM, and Sangsangin, were pledged as collateral when the company issued 13 billion Korean won in convertible bonds to Sangsangin Savings Bank and Sangsangin Plus Savings Bank in September 2023 to secure operating funds.

However, the sharp decline in Sonid’s stock price led to the execution of collateral rights on the pledged assets within two years of the convertible bond issuance. Sonid’s stock price has been in a steady downward trend, falling to penny stock status. It was trading at around 1,200 won a year ago but now stands at 360 won.

The company had acquired these listed company shares for investment purposes. It decided to use them as collateral for convertible bond issuance rather than selling them on the market, as it had a positive outlook on their stock prices. However, contrary to expectations, the prices of the listed companies’ shares fell sharply, eventually dropping to a level where Sangsangin Savings Bank executed its collateral rights. Sonid failed to gain investment profits and ultimately incurred significant losses after providing the shares as collateral and having them liquidated through forced sales.

Regarding this, the company explained, “Since the recent change in the largest shareholder, the new management has been working to improve the financial structure by selling non-core assets.” Sonid changed its largest shareholder through a third-party rights offering in March of this year. The current largest shareholder is MHTech, which holds 20.74%.

However, concerns among investors persist due to the involvement of individuals linked to Ms. Kim Keon-hee’s stock price manipulation scandal within the new largest shareholder group. MHTech is wholly owned by MWL, represented by Mr. Hwang Man-hoi, who previously served as CEO of Hyulim Holdings.

Hyulim Holdings is a nominal company that was the largest shareholder of Hyulim Robot, a KOSDAQ-listed firm, which was once a major shareholder of Samtoogun. As a result, the special counsel team investigating former first lady Kim Keon-hee’s alleged stock price manipulation of Samtoogun conducted a search and seizure.

The new management immediately decided on a free share consolidation upon taking control. The consolidation will merge 10 ordinary shares into one, reducing the capital from 36.9 billion Korean won to 3.7 billion Korean won. This measure aims to resolve the accumulated deficit of 78 billion Korean won. The company stated in a shareholder letter, “We will improve the financial structure and push forward with business restructuring through the free share consolidation.”