Is investing in Glosfer Labs a good idea?
Kim Tae-won, CEO of blockchain company Glosfer, was named the new head of Kosdaq-listed company GMR Materials. During a GMR Materials shareholder meeting, the company’s name was changed to Glosfer Labs and Cho San-koo, head of the Sharing Economy Association of Korea, was named the new outside director. On Sept. 30, Glosfer became the largest stakeholder of GMR Materials after purchasing the shares previously owned by Gold Mountain Group. Through the shareholder’s meeting, Glosfer completed the backdoor listing process. Choosing backdoor listing Glosfer (Glosfer Holdings) on Sept. 30 bought the 1.18 million shares that were owned by Gold Mountain in GMR Materials for 16 billion won. Including convertible bonds, which the blockchain company bought for 3.5 billion won, Glosfer became the largest stakeholder of GMR Materials with a 23.39 percent stake. The previous governing structure of GMR Materials was Gold Mountain Group (56.6 percent) controlling GMR Korea (23.39 percent), which controlled GMR Materials. But with the change in September, Kim Tae-won, who solely owns Glosfer (100 percent), controls GMR Korea with a 23.39 percent stake, which controls GMR Materials, soon to be Glosfer Labs. Glosfer earlier this year appeared to be interested in being listed on the stock market using the government’s special leniency program. However, it seems the company ultimately decided to try for a backdoor listing as the government perception on the blockchain company has been unfavorable. Where did they get the money? Glosfer is a blockchain solution company that was founded in March 2017. It has been involved in numerous blockchain projects ranging from the issuance of a regional currency for Nowon District, Seoul, providing crytocurrency exchange solutions, an ICT based mental health program, blockchain music platform and a government trial project on issuing a blockchain based verification system for container shipments at docks. The funding that Glosfer has used in acquiring a listed company doesn’t seem to have come from the earnings it made in participating in various government projects, but most likely from initial coin offerings (ICO). Glosfer was able to secure roughly 14.8 billion won from an ICO it pursued on Sept. 25 2017, just before the government’s ban on ICOs. Additionally, the company around that time had 3,500 bitcoins. Considering that bitcoin prices shot up at the end of 2017, the company would likely have sold the bitcoin for 20 million won each, which would roughly translate to 70 billion won. Rani’s note: Investors should be cautious On Oct. 1, the day after Glosfer announced its acquisition of GMR Materials, GMR Materials’ stock soared to hit the daily limit during the day. But by the end of the day it closed at the same as the day before, as investors started to dump shares to profit from the hike. While it has continued to move up and down since, it is currently higher than on Oct. 1, which closed at 464 won per share. On Nov. 15, GMR Materials’ closed the week at 587 won per share. Glosfer said the reason it is changing GMR Materials’ name is as part of a strategy to change the company’s management purchase and business diversification. The company will be completely turning to blockchain technology. But it’s uncertain how much of GMR Materials’ corporate value will improve with the change in its business direction. Glosfer on Sept. 30, when it official became the largest stakeholder of GMR Materials, released several plans. First, GMR Materials will be issuing a 5 billion won paid-in capital increase on Jan. 31 2020. Additionally, the company will be issuing convertible bonds on Nov. 29 2020 as well as on Jan. 30 2020, including 7 billion won for Cornerstone Alliance on Jan. 30 2021. It’s hard to tell how much the company’s shares will increase in the process of paid-in capital increase and convertible bonds. But the increase in the number of shares means that shares that an investor currently holds will devalued. It is therefore advisable that potential investors properly understand the public notification by the company as one should be aware of what is happening with current shares — you don’t want to buy shares today only form them to be devalued tomorrow.