MetaCare Announces Subsidiary Merger... Downward Adjustment of CB Conversion Price and Lock-up Release Cause 'Overhang Burden'

KOSPI-listed company MetaCare (CEO Lee Soo-jin) is stepping up management efficiency through an absorption merger of its subsidiary. However, as the stock price continues to be weak even after the recent capital reduction without refund, the conversion price of its convertible bonds (CB) has dropped to the lowest adjustment limit under regulations, and the lock-up on the major shareholder's shares has been released, raising concerns about a stock overhang burden.

MetaCare announced through a public disclosure on the 28th that it will absorb and merge JK Medi, a medical device wholesale and retail subsidiary in which it holds a 100% stake, in a capital-free manner without issuing new shares. The merger date is October 1st.

Meanwhile, the result of the downward adjustment of the convertible bond (CB) conversion price due to the weak stock price was also disclosed. The conversion price of MetaCare's 17th private placement CB was lowered from the previous 1,855 won to 1,815 won, the lowest adjustment limit, in line with the regular refixing cycle. As the unit price for stock exchange decreased, the potential volume of shares that could be converted in the future increased by about 118,000 shares to 5,509,641 shares.

Along with this, the lock-up period for 700,000 common shares of MetaCare (7,000,000 shares before the capital reduction) held by MetaLabs, MetaCare's largest shareholder, has also expired. As the major shareholder's volume can now be put on the market as for sale, it is adding to overhang concerns.

Despite efforts to reorganize through the subsidiary merger, the combination of the increase in potential shares due to the CB refixing and the release of the lock-up is expected to act as a burden on the short-term stock price flow.