en.Wedoany.com Reported - Fabless semiconductor company HyDeep has raised 6.5 billion won by converting debt owed to its largest shareholder into equity. The company, which has fallen into capital impairment due to consecutive losses, aims to alleviate financial pressure through this financing.
The company, specializing in touch and stylus integrated circuit design, disclosed on June 10 that it will raise 6.5 billion won through a third-party allotment capital increase. The payment date is June 18, and the new shares are scheduled to be listed on July 9. Of this amount, 3.5 billion won represents loans provided to the company in March by CEO and largest shareholder Ko Beom-gyu and his related parties, which will be converted into equity. Ko Beom-gyu lent 2.8 billion won, while related parties provided 700 million won. Through the debt-to-equity conversion, liabilities on the company's balance sheet will be transformed into capital.
In addition to the debt-to-equity portion, Ko Beom-gyu will inject approximately 1.4 billion won in cash. The remaining 1.6 billion won will be allocated to a private equity fund managed by Tiger Alternative Investors, as well as several corporate and individual investors. This capital increase will bring approximately 3 billion won in new cash to the company. Combined with cash and cash equivalents of about 3.16 billion won as of the end of March, HyDeep's available liquidity will rise to slightly over 6 billion won. The company stated that the raised funds will be used for operating expenses and other purposes.
HyDeep has already raised funds twice last year, including a 5 billion won third-party allotment capital increase in February and the issuance of 10 billion won in convertible bonds in April. Ko Beom-gyu invested approximately 2.235 billion won in the February capital increase. Despite these financings, the company's financial condition has continued to deteriorate. After temporarily resolving capital impairment through a 5-to-1 reverse stock split in December last year, total equity fell again to negative 700 million won at the end of the first quarter this year, plunging back into full capital impairment.
The company's business operations have effectively come to a near standstill. Total revenue in the first quarter was only about 22 million won, with an operating loss of approximately 2.82 billion won. Revenue plummeted 98% year-over-year, compared to about 1.02 billion won in the same period last year, while the operating loss expanded by 28% over the same period. The company designs touch and stylus integrated circuits for mobile devices.
HyDeep stated that it expects next-generation input technology to enhance performance. The company said that in the first quarter, its "integrated touch and stylus solution" passed final quality verification by a global mobile device manufacturer. A company official said the manufacturer's name and country cannot be disclosed, adding that HyDeep plans to seek more customers in South Korea, North America, and China to begin mass production as soon as possible. The solution uses a battery-free electronic pen for pen input without requiring a separate digitizer layer.
Samsung Electronics uses a separate digitizer layer for pen recognition in its Galaxy Tab products, with the dedicated S Pen operating without a battery, but the additional layer increases device thickness and manufacturing costs. Apple synchronizes the Apple Pencil with the iPad without a separate digitizer layer, but the stylus contains a built-in battery, making the structure more complex. HyDeep says its technology aims to overcome the drawbacks of both approaches.
HyDeep's actual performance has fallen far short of its projections at the time of listing. External evaluator Donghyeon Accounting Corporation, in a securities registration statement submitted in 2021, projected HyDeep's 2025 revenue at 383.4 billion won. Actual total revenue last year was only 1.77 billion won, less than 0.5% of the forecast. The company was also projected to generate 137 billion won in operating profit but actually recorded an operating loss of 11.7 billion won. Revenue declined from 10.5 billion won in 2023 to 5.9 billion won in 2024, and further to 1.77 billion won in 2025.
Once the latest capital increase is completed, based on first-quarter data, the company is expected to temporarily resolve its capital impairment issue. However, ongoing operating losses still pose the risk of falling back into impairment. Another major issue remains the 10 billion won third-series convertible bonds issued last year. The conversion price is 3,670 won, far above HyDeep's current stock price. If this gap persists, bondholders will have little incentive to convert bonds into shares, increasing the likelihood that the company will have to repay the bonds in cash. Previously in February last year, the company repaid 8.1 billion won in a lump sum after holders of its 14 billion won second-series convertible bonds exercised early redemption rights. If similar early redemption demands arise for the third-series convertible bonds before maturity, the company could again face a severe cash crunch.
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