RaymondsIndex

When looking at the convertible bond (CB) disclosure, the phrase “there is a refixing clause” appears.

Most people just pass it on.

That's the second most expensive mistake.

What is refixing?

Refixing = provision for downward adjustment of conversion price

CB can be converted into stock at a specific price

- Example: Conversion price at time of issuance: 10,000 won → Automatically adjusted to 8,000 won when stock price falls

- The more it is adjusted → the more stocks can be secured with the same amount of CB.

- Result: Additional dilution of existing shareholders’ equity

Looking at the numbers, it looks like this

Example:

CB issuance size: KRW 10 billion

- Initial conversion price: 10,000 won → 1 million new shares issued upon conversion

- Conversion price after refixing: KRW 5,000 → 2 million new shares issued upon conversion

If the stock price is cut in half, the amount of dilution doubles.

CB underwriters acquire more shares as the stock price falls.

Individual investors are more diluted as stock prices fall.

This structure is not accidental.

When refixing is especially dangerous

When the CB acquirer is connected to a major shareholder or executive

- When there is no refixing lower limit or it is set very low.

- When multiple CBs are accumulated through short-term repeated issuance

- A vicious cycle of falling stock prices → refixing → further conversion → further falling stock prices

Heo Seo-young (2025) Empirical evidence: Minority shareholder losses occur structurally in companies issuing CBs with refixing provisions.

How to check

DART public disclosure search → “Convertible bond” → Search for the relevant company

2. Check the “Conversion Price Adjustment Clause” section in the disclosure.

3. Check the refixing lower limit (lowest conversion price)

4. Check the corporate name of the CB acquirer → Check whether major shareholders are connected

RaymondsRisk automatically analyzes this relationship network and provides it as a relational risk index.

key message

The refixing clause is the CB underwriter’s insurance.

The insurance premium is paid by existing shareholders.

■ Reference materials

Heo Seo-young (2025): CB conversion event and minority shareholder loss — KOSDAQ empirical study

- Yang (2017): Demonstration of tunneling mechanism and minority shareholder losses

- RaymondsRisk White Paper: https://www.konnect-ai.net/whitepaper

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