Lunit Faces Challenges AsIts Rights Offering Raises Less Capital Due to a Stock Price Decline
Lunit headquarters. (Photo courtesy of Lunit)
Alarm bells are ringing for Lunit’s global expansion strategy. This is because the amount of capital it can secure from its rights offering is expected to decrease, as a drop in its stock price has lowered the issue price. As a painful last-resort measure, the company has announced it will prioritize cuts to overseas subsidiary operating costs and R&D infrastructure investment to compensate for the reduced funds.
According to industry sources on March 23, Lunit confirmed the first issue price for its rights offering at 26,750 won per share on March 17. This is over 15% lower than the initially planned issue price of 31,650 won announced when the rights offering was first revealed in January.
Consequently, the total planned fundraising amount of 250.3 billion won (approximately $166.8 million) is now projected to shrink by about 38.4 billion won to 211.6 billion won. Lunit had planned to allocate the funds secured from the rights offering to debt repayment (137.8 billion won) and operating funds (112.5 billion won), but this unexpected shortfall has made a revision of the plan inevitable.
The problem arose as Lunit prioritized debt repayment. To secure its financial soundness, Lunit decided to maintain the 137.8 billion won for debt repayment and its domestic operating funds as much as possible. As a result, the 38.4 billion won shortfall will be entirely covered by cutting funds directly linked to global expansion: the operating costs of overseas subsidiaries and IT infrastructure investment.
The U.S. market will be hit the hardest. Lunit had originally planned to invest 26.9 billion won in its U.S. subsidiary (Lunit USA, Inc.) to expand pharmaceutical partnerships and promote its cancer treatment companion diagnostic solution, ‘Lunit SCOPE’. However, this budget now faces a complete cut due to the decision. This is considered a particularly painful blow, as the U.S. is a strategic beachhead for expanding sales of ‘Lunit SCOPE’, a key revenue driver for the company.
The situation is similar for its Japanese and European subsidiaries. The Japanese subsidiary (Lunit Japan) saw its planned budget of 3.7 billion won cut, which was intended for expanding local sales networks for its chest X-ray and mammography AI diagnostic solutions. Likewise, a 2 billion won capital injection for the European subsidiary (Lunit Europe GmbH), meant for new hires and advertising, has become uncertain.
In addition to the overseas subsidiaries, the budget for cloud and software usage fees—a core part of its technology development infrastructure—will also be reduced by 6.1 billion won, from the original 8.9 billion won to 2.8 billion won. Lunit had planned to invest heavily in building its cloud environment by 2028 to secure flexible GPU (Graphics Processing Unit) resources and respond to AI hardware volatility, but it now appears inevitable that the pace of technological development will have to be adjusted due to the funding shortage.
An industry official observed, "Lunit’s plans to expand its sales network and hire local talent through its global bases have been disrupted, which could also delay its timeline for achieving profitability. As support for overseas subsidiaries faces difficulties, there are growing concerns about a decline in its competitiveness in the global market.
Choi Mun-hee
댓글
0