[At the Crossroads] VUNO ① Pushing Debt Onto Retail Shareholders... Largest Shareholder Stands Aside

Capital Increase to Repay Perpetual CB...
Major Shareholder to Invest Only 300 Million Won

Even After Easing Immediate Pressure,
200 Billion Won in Debt Remains... Concerns Over Additional Fundraising

KOSDAQ-listed company VUNO is reaching out to retail shareholders for the first time since its listing. The company plans a large-scale paid-in capital increase, with nearly half of its total shares to be newly issued. This move is a preemptive measure to repay its previously issued 20 billion won perpetual convertible bonds (CB) before their interest rate increases.

Despite the expected dilution of share value for existing shareholders due to the scale of this capital increase, controversy has arisen as Lee Yeha, chairman of VUNO’s board and its largest shareholder, has announced that he will hardly participate in the rights offering.

According to the Financial Supervisory Service’s electronic disclosure system on September 2, VUNO has decided to carry out a paid-in capital increase through a shareholder allocation followed by a public offering of forfeited shares, worth 31.4 billion won. The planned issue price per new share is 4,980 won, which represents a 32% discount compared to the previous day’s closing price before the announcement.

Each existing share will entitle the holder to receive 0.45 new shares. This means that the total number of shares will increase by around 45%. As a result, existing shareholders will see their share value significantly diluted. Indeed, after the announcement of the capital increase, VUNO’s share price fell by more than 30%.

VUNO plans to use 20 billion won out of the funds raised from this capital increase to repay the principal and interest of its 3rd perpetual CB. Previously, in December 2024, VUNO issued the 3rd perpetual CB worth 23.7 billion won to institutions such as KOSDAQ venture funds. The purpose of this fundraising was to cover the business expenses for overseas expansion. As of the first half of this year, VUNO had used 16.8 billion won of these funds.

This perpetual CB features a “step-up” clause, which adds 4 percentage points to both the coupon and the maturity yield two years after the bond’s issuance date. Consequently, the coupon, which was initially 0% and the maturity yield at 5% at issuance, will become 4% and 9%, respectively, starting this December. This will result in annual interest expenses of about 900 million won.

If these CBs are not converted to stock, the interest rate will increase by 4% every year. The conversion price of this perpetual CB is 25,337 won; unless VUNO’s share price increases by more than five times its current level, conversion to shares is unlikely, meaning the company could face ever-increasing interest payments.

Even if this capital increase temporarily eases funding concerns, the issue is likely to resurface. In December last year and again this February, VUNO issued its 4th and 5th perpetual CBs, each worth 10 billion won. These bonds also contain the same step-up clause as the 3rd perpetual CB, with their interest rate set to increase by 4% annually starting in December 2027 and February 2028, respectively.

The market has criticized VUNO for appealing to its shareholders in a time of crisis while Lee Yeha, chairman of the board and largest shareholder, stated he would hardly participate in the rights offering. Lee has announced that he plans to subscribe to only 7% of the shares allotted to him, which is worth about 300 million won at the planned issue price. Reportedly, this will be funded by selling his subscription rights certificates.

In response, a VUNO representative stated, "The details regarding the participation of the largest shareholder and related parties in the subscription, as stated in the securities registration statement, have not yet been finalized. The actual extent and decision to participate will depend on the confirmed issue price, market conditions, and personal financial circumstances. The issuance terms of previously issued bonds are under constant review, and the timing and manner of future responses will be determined by the board of directors, based on the market environment, business plans, and financial status."

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