Equity tunneling in Korea/Asia: Infovine chief accused of harming shareholders’ values by issuing “needless” bond warrants; “With that issuance, Kwon arranged to receive 70% of the newly issued warrants at a deeply undervalued price, resulting in dilution for all other shareholders”


Updated : 2015-03-26 18:22

Infovine chief accused of harming shareholders’ values

By Kim Jae-won

Edouard Mercier, head of Hong Kong-based hedge fund Ascender Capital, said Thursday that the CEO of a local IT company Infovine harmed the interests of minority shareholders by issuing “needless” bond warrants (BW) in August 2013.
Mercier, investment principal of Ascender, said the mobile certificate storage service company’ shares are trading at about 50 percent of its potential value due to the company’s poor corporate governance. Ascender has been a long-term investor in Infovine since 2011, and now holds over 3 percent of the company.
“Infovine marks 76 percent of net margins, running very good business. Its share prices could double to 55,000 won,” said Mercier in a conference call interview.
Shares of Infovine are trading at about 26,000 won at the nation’s minor bourse of the KOSDAQ. It is about 16 percent lower than its initial public offering (IPO) price in 2010.
Mercier blamed the company’s CEO Kwon Seong-jun for the discount, claiming that he issued bond warrants in August 2013 despite the company enjoying a strong financial standing with no need to raise additional cash.
“With that issuance, Kwon arranged to receive 70 percent of the newly issued warrants at a deeply undervalued price, resulting in dilution for all other shareholders.”
However, Infovine denied this, saying that Ascender is pressing its CEO and the company with the BW issuance case to get paid “excessive” dividends.
“Ascender asked the company to pay 49.3 billion won in dividends, which is most of our internal reserves. We issued the BW by law and regulations and Kwon did not benefit from the issuance,” said Kim Kwan-young, a director at Infovine.
Both sides will meet at the company’s shareholders’ meeting scheduled for Friday in the company’s main office in Mapo, western Seoul. Ascender’s legal representative in Korea will raise the issue in the meeting.
Conflicts between Ascender and Infovine came amid foreign investors raising their voices in the companies’ management, changing from their usual passive stances.
Last month, a foreign investor in KB Financial Group recommended LG Academy President Lee Byung-nam as an outside director of the nation’s second-largest financial company by assets, in cooperation with a local minor shareholders’ rights activist group titled Solidarity for Economic Reform.


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