[Wealth Succession] Intops ③ IBK and KOSDAQ Venture Fund Acquire EB... Reasons for Investment

IBK Capital, Main Investor, Jointly Operating Funds with Intops
Institutions Say "Appropriate Returns Possible" Despite Capped Call Option

The main underwriter of the exchangeable bonds (EB) issued by the KOSDAQ-listed company Intops has been identified as a fund jointly created by IBK Capital and Kyobo Securities. IBK Capital is a partner that manages several funds together with Intops' subsidiary, Intops Investment. Other investors acquired Intops EB through the "KOSDAQ Venture Fund."

According to the Financial Supervisory Service's electronic disclosure system as of June 10, the largest investor in the first EB issued by Intops in October last year was the "IBKC-Kyobo Mezzanine New Technology Business Investment Association No. 1." This fund acquired EB with a face value of KRW 3 billion.

IBKC-Kyobo Mezzanine New Technology Business Investment Association No. 1 is a fund jointly established by IBK Capital and Kyobo Securities. Both companies each hold a 49.5% stake in the fund. Kyobo Securities acted as the lead manager for the issuance of Intops' EB.

IBK Capital is a wholly owned subsidiary of the state-run Industrial Bank of Korea (IBK). It was established in 1986 by the government and Industrial Bank of Korea to promote, discover, and support promising small and medium-sized enterprises. Unlike most general capital firms that focus on auto installment plans or personal credit loans, more than 95% of IBK Capital's revenue is concentrated in corporate finance and investment finance.

IBK Capital maintains a close relationship with Intops' subsidiary, Intops Investment. According to Intops' first quarter report this year, IBK Capital and Intops Investment are jointly managing a total of three funds. The combined scale of these funds is approximately KRW 20 billion.

Intops Investment is an investment company established in 2018 under the leadership of Kim Geunha, CEO of Intops. It is a wholly owned subsidiary of Intops. Currently, CEO Kim serves as a non-executive director and chairs the board of Intops Investment.

An IBK Capital official stated, "We made this investment through a blind fund (investment association) that primarily targets mezzanine investments in listed companies," adding, "Intops' EB, backed by a long business history and stable management performance, offers lower downside risk and higher return opportunities than loan interest, which made it attractive to us." The official also said, "At the time, we were not in a position to be aware of the controlling shareholder's succession plans and did not conduct any short selling at all."

Besides IBK Capital and Kyobo Securities, other investors included Meritz Securities (KRW 2 billion), Suseong Asset Management (KRW 1.5 billion), iTrust Asset Management (KRW 1 billion), GVA Asset Management (KRW 1 billion), Orion Asset Management (KRW 1 billion), Leading Asset Management (KRW 800 million), Broadhigh Asset Management (KRW 700 million), EIP Asset Management (KRW 500 million), Kansus Asset Management (KRW 500 million), NICE Investment Partners (KRW 500 million), and Artman Asset Management (KRW 500 million), with a total of 11 institutions investing through various funds.

Many of these institutions invested in Intops' EB via the KOSDAQ Venture Fund. The KOSDAQ Venture Fund is a policy-type product created by the government to invigorate domestic venture companies and the KOSDAQ market. Fund operators are required to allocate a certain percentage of assets to the stocks of venture companies and small to mid-sized companies listed on the KOSDAQ. Investors who subscribe to this fund receive income tax deductions, making it a fund that indirectly provides tax benefits.

Previously, Intops faced suspicions that it encouraged short selling by attaching a unique "call option (purchase right)" to the EB issued based on its treasury shares. The call option allows Intops to redeem the EB from investors with only 0.1% interest if the share price of Intops exceeds 130% (KRW 26,792) of the exchange price (KRW 20,609) for 10 consecutive trading days.

For example, if Intops' share price rises 30% above the exchange price, Intops notifies the institutions of the call option. At that point, each institution can choose whether to exchange the EB for shares or to give up the EB and receive only the interest. If the institution chooses to exchange for shares, it forfeits the protection against a decline in share price.

EBs are products that seek share price appreciation while limiting losses. If the share price falls after a conversion request—due to an overhang (potential oversupply) issue or other factors—institutions could face even greater losses, assuming that risk themselves.

This kind of capped call option structure is seen as advantageous to Intops. If the share price falls, the largest shareholder can buy back the shares; if the price rises, Intops can legally sell its treasury shares in the market without being affected by amendments to the Commercial Act that require mandatory cancellation of treasury shares.

Regarding this, a representative from one of the institutions investing in the EB said, "With EB, you can immediately receive shares upon conversion, so the downside risk is limited, and even with these options, you can earn returns of 20-30%. There is no real reason for us to engage in short selling."

Another EB investor commented, "These days, institutional investors are less focused on holding shares indefinitely for high returns and more on safely targeting an appropriate return of around 30%. From the perspective of Intops, if investors keep holding shares without converting, the risk of overhang persists. That is why such clauses are now commonly included by mutual agreement, to encourage selling at a reasonable level."

This content was produced with the assistance of AI translation services.