[Edaily Reporter KIM SAE-MI ] Chabiotech Co.,Ltd.(085660)has removed the “2027 initial public offering (IPO)” obligation that had been tied to its key subsidiary, Cha Healthcare. In the process of restructuring its existing financial investor (FI) framework by bringing in new FIs, the company made an early redemption of the exchangeable bonds (EBs) it had issued to STIC Investments, Inc., thereby eliminating the contractual IPO obligation as well.

Nevertheless, Chabiotech Co.,Ltd. maintains that “there is no change to the 2027 listing plan.” However, specific schedules, such as the application for a preliminary listing review, have not yet been determined. Considering that financial authorities have significantly tightened regulations on duplicate listings of subsidiaries resulting from spin-offs, doubts are being raised as to whether the “2027 IPO” target is actually feasible.

Cha Healthcare’s IPO Promise Spans Over a Decade… The Burden of FI Exit Falls on Chabiotech Co.,Ltd. Cha Healthcare’s IPO

plans appear to have been in the works since at least 2013. The redeemable convertible preferred shares invested in by Odin Fund 6 in 2013 were subject to a condition that they would automatically convert to common stock upon Cha Healthcare’s IPO, and in 2017, Odin Fund 7 invested 110 billion won. Subsequently, in 2021, Cha Healthcare selected DaishinSecurities and Shinhan Financial Investment as lead underwriters and set a 2022 listing as its official target, but the IPO process was delayed due to factors such as the COVID-19 pandemic.

Starting in late 2024, the company set a new goal of “listing in 2027.” This was because Chabiotech Co.,Ltd. issued 120 billion won worth of exchangeable bonds (EBs) to STIC Investments, Inc. in December of that year, with Cha Healthcare shares as the exchange target, and agreed to list Cha Healthcare within three years of the transaction’s closing date.

As the company has been raising external funds with an IPO in mind for over a decade, the burden resulting from the listing delay is mounting. If the IPO continues to be postponed, institutional investors’ recovery of their investments will be delayed, and costs associated with put options or guaranteed rates of return may fall back on the parent company, Chabiotech Co.,Ltd.

In fact, Chabiotech Co.,Ltd. has been repurchasing shares of Cha Healthcare following the exercise of put options by financial investors (FIs). The recurring cash outflows resulting from this process could erode Chabiotech Co.,Ltd.’s financial capacity, an issue that is directly linked to the interests of the parent company’s individual investors.

Chabiotech

Co.,

Ltd. Switches FIs… IPO Obligation Expires Upon Repayment of Stick EB

Notably, by recently restructuring

its FI

arrangement, Chabiotech Co.,Ltd. has also eliminated Cha Healthcare’s 2027

IPO obligation

.

Last June, Chabiotech Co.,Ltd. sold 7,692,308 common shares of Cha Healthcare to the Pium AI Future Healthcare New Technology Financial Investment Fund for 200 billion won. Prior to this, it converted approximately 153.9 billion won in loans to Cha Healthcare into equity. This equity conversion was a precondition of the share purchase agreement signed with Pium.

At the same time, Chabiotech Co.,Ltd. invested 60 billion won in cash into the Pium fund—which had acquired the Cha Healthcare shares—to secure a 28.99% stake. Based on a simple calculation, Chabiotech Co.,Ltd.’s net cash inflow from the sale of existing shares amounts to approximately 140 billion won.

The company also acknowledged that the purpose of this transaction was to restructure its existing financial investor (FI) base. A Cha Biotech Group official explained, “We brought in the Pium AI fund as a new investor to restructure our existing FI structure,” adding, “Part of our investment serves to strengthen our indirect control over CHA AI Healthkare.”

The subsequent flow of funds is also drawing attention. Later that same month, Chabiotech Co.,Ltd. made an early redemption of the 120 billion won in exchangeable bonds (EBs) it had issued to STICK, repaying them for approximately 140.8 billion won. The public disclosure specified the source of funds for the EB redemption as “proceeds from the sale of Cha Healthcare shares.” The amount of approximately 140 billion won—after subtracting the 60 billion won investment from the Pium transaction—almost exactly matches the EB redemption amount.

However, Chabiotech Co.,Ltd. drew a clear line, stating that the two transactions were not linked from the outset. A Chabiotech Group official said, “The transaction with the Pium AI fund involved the sale of existing CHA AI Healthkare shares we held, while the transaction with STICK involved the redemption of our EB, which could be exchanged for CHA AI Healthkare shares in the future,” adding, “They merely occurred around the same time; they were not linked from the beginning.”

Consequently, the Cha Healthcare IPO obligation entered into with Stick during the FI restructuring process has also been eliminated. A Cha Biotech Group official explained, “Although there was an IPO obligation under the contract with Stick when the EB was originally issued, since that EB has now been canceled, the IPO obligation under the original contract has also been extinguished.”

With the deadline for existing FIs to recoup their investments approaching, bringing in a new FI has effectively allowed the company to sever ties with Stick while also eliminating the IPO deadline that had been set for next year.

However, the issues with the existing FIs are not entirely resolved. Last August, when DaishinSecurities-Y2HC New Technology Investment Fund and HANWHA INVESTMENT & SECURITIES exercised their put options, Chabiotech Co.,Ltd. agreed to acquire 2,524,051 shares of Cha Healthcare convertible preferred stock for approximately 80.3 billion won. As a result, Chabiotech Co.,Ltd.’s stake in Cha Healthcare—which had dropped to 49.13% immediately after the Pium transaction—rose again to 60.1%.

Chabiotech Co.,Ltd. stated that regarding financial investors (FIs) who may exercise additional put options, “a small amount remains.” It did not disclose the specific investors or the remaining amount that could be claimed. Regarding the reason for raising the internal rate of return (IRR) from the original 4% to 10% for a certain period by postponing the put option exercise date in the contract with existing FIs, the company simply replied, “This was the result of an agreement with the FIs to amend the existing contract.”

IPO Means Dual Listing, Not Doing So Is a Burden… Cha Healthcare’s Dilemma

On the other hand, the path to listing Cha Healthcare has become much narrower than before. Under the dual listing regulations implemented by the Financial Services Commission and the Korea Exchange on the 3rd of last month, the listing of a subsidiary formed through a spin-off requires the consent of the parent company’s shareholders. The “3% rule,” which limits the voting rights of shareholders holding more than 3% of the shares to 3%, also applies in this process. It is difficult to be exempted from the shareholder consent procedure simply because a significant period has elapsed since the spin-off.

Cha Healthcare was spun off from Chabiotech Co.,Ltd. in 2013 and is a core subsidiary that accounted for 78.8% of Chabiotech Co.,Ltd.’s consolidated revenue as of last year. Industry observers believe it will be difficult to gain recognition for the legitimacy of a separate listing under the strengthened dual-listing regulations, given that the subsidiary accounts for such a large share of the parent company’s performance.

An investment banking industry official stated, “I believe a domestic IPO for Cha Healthcare will be difficult due to the dual-listing issue,” adding, “Since the business areas of the parent company, Chabiotech Co.,Ltd., and Cha Healthcare overlap significantly, it will inevitably face a heavy burden in meeting the current dual-listing review criteria.”

Despite this situation, Chabiotech Co.,Ltd. maintains its position that “the 2027 listing plan remains unchanged.” However, the company merely responded, “No specific schedule, such as the application for a preliminary listing review, has been determined yet,” adding, “We plan to explore appropriate measures in accordance with the financial authorities’ detailed regulations and guidelines regarding dual listings.”

The nature of Cha Healthcare’s IPO has now changed from what it was in the past. Whereas it used to be an “obligation” to list by a specified date under a contract with financial investors (FIs), now that the EB agreement with STICK has ended, it has become a management plan that Chabiotech Co.,Ltd. is pursuing autonomously. Although the company has been raising external funds with an IPO in mind for over 10 years and the burden of FIs recouping their investments due to the listing delay has become a reality, the contractual mechanism that actually compelled the listing has disappeared.

Furthermore, although the threshold for dual listings has risen, the company has so far offered only a general statement that “there is no change to the 2027 listing plan.” Cha Biotech Group did not provide specific answers to questions posed by Edaily regarding whether practical work with the lead underwriter is underway, whether preliminary consultations with the Korea Exchange regarding dual listings have taken place, or the timeline for securing shareholder approval for Chabiotech Co.,Ltd.