STCube: Rights Offering Capital Raise of 89 Billion Won

• STCube announced it plans to increase capital by 89 billion won (13 billion won through a third party rights offering and 75.7 billion won through shareholder preferred capital increase).

• We have a positive view of STCube's capital raise and there could be some alpha generating returns in our view.

• The fact that the company's share price surged nearly 5x from the last rights offering in May 2022 (to October 2022) is likely to positively impact capital raise this time.

After the market close on 26 August, STCube (052020 KS) announced it plans to increase capital by 89 billion won (13 billion won through a third party rights offering capital increase targeting STCube & Co and 75.7 billion won through shareholder preferred capital increase).

STCube (market cap of 251 billion won) develops immunotherapy drugs for cancer. Biomedical Holdings is currently the largest shareholder of ST Cube.

The combination of the third party allocation capital increase and shareholder preferred capital increase would allow the largest shareholder to retain its controlling stake and also to raise capital for business expansion.

We have a positive view of STCube's capital raise and there could be some alpha generating returns in our view. The company has a solid pipeline of new products under development. In addition, STCube's share price surged by nearly 5x (from May to October 2022) after the previous rights offering in May 2022.

A main purpose of this paid-in capital increase is to remove the uncertainty caused by the designation as an administrative stock which could potentially be delisted if there are lack of enough liquidity. Since STCube (052020 KS) has been designated as "administrative issue," the Korea Exchange excluded it from KOSDAQ 150 and KRX 300 indices on 26 March 2024. Other major reasons for the capital increase include expansion of its existing business, R&D, and working capital. The company does not plan to use the proceeds for debt repayment or M&A.

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