For the first time, CHA Biotech has crossed the 1 trillion won ($688 million) revenue mark in 2024, a milestone that might have set off celebrations under different circumstances.

Instead, the company finds itself at odds with investors, its stock price whipsawed by controversy as investors push back against a 250 billion won rights offering that they claim unfairly burdens them while insiders are protected.

The earnings report, released last Friday, revealed 1.045 trillion won in revenue in 2024, up 9.5 percent from the previous year. But alongside the record-breaking top line, operating losses widened to 59.6 billion won as the company poured money into its U.S. CDMO subsidiary, an unfinished hospital expansion in Los Angeles, and ongoing expansion in Australia.

Three months ago,  CHA Biotech unveiled the capital raise, triggering an immediate market reaction. Investors saw their holdings diluted, with no clear immediate benefit in sight. Then, just days ago, the company announced a restructuring plan to merge its hospital subsidiary CHA Healthcare with its facility management unit CHA Cares—another move that investors claim disproportionately benefits insiders.

The breakdown: where the money is going

CHA Biotech’s operating loss nearly doubled from the previous year, and the company blames a combination of factors. Hollywood Presbyterian Medical Center remains unfinished, requiring another 130 billion won to comply with California’s strict seismic safety regulations. At the same time, Matica Biotechnology, its U.S.-based cell and gene therapy (CGT) CDMO, has yet to turn a profit. Meanwhile, CHA Biotech’s Australian hospital network is expanding, but startup costs are piling up faster than revenue can catch up.

Despite investor skepticism, the company insists the capital raise is not just necessary but urgent.

“This isn’t about keeping the lights on—it’s about ensuring we’re still a leader a decade from now,” a CHA Biotech spokesperson said, emphasizing the urgency of the capital raise. “Without this funding, we’re not just delaying projects; we’re risking our position in cell therapy, CDMO, and global healthcare. The competition isn’t waiting, and neither can we.” 

According to the company’s filing, the capital will be distributed as follows: 110 billion won for acquiring securities of other companies, 120 billion won for operational costs, and 20 billion won for facility investments. 

But it’s the 90 billion won earmarked for CHA Healthcare that has drawn the most scrutiny. Retail investors question why such a large sum from CHA Biotech is flowing into CHA Healthcare, particularly when it already accounts for over 70 percent of CHA Biotech’s consolidated revenue. The company argues that strengthening CHA Healthcare will, in turn, boost CHA Biotech’s overall value.

At the center of the financial burden is CHA Hollywood Presbyterian Medical Center (CHA HPMC), a key U.S. asset under CHA Healthcare. Since the 1971 San Fernando earthquake, California has imposed some of the world’s toughest seismic safety regulations, according to the CHA Biotech spokesperson. By January 2030, hospitals that fail to meet NPC-5 compliance will be forced to shut down, he said. 

CHA HPMC’s new patient tower under construction since 2018, remains unfinished, with costs ballooning due to Covid-19 delays and inflation. The CHA Biotech spokesperson said that although the project is 85 percent complete, another 130 billion won is needed to finish it. “Without compliance, CHA HPMC won’t be able to operate past 2030,” he said “This investment is not optional—it’s mandatory.”

Still, investors question whether CHA Biotech should foot the bill, given that U.S. hospitals like Cedars-Sinai have turned to the bond market, issuing 1.3 trillion won in debt to fund their expansions.

CHA Healthcare and CHA Cares: a strategic move or insider favoritism?

Just days ago, CHA Biotech announced the merger of CHA Healthcare and CHA Cares, adding another layer of complexity to the situation.

CHA Healthcare, which operates over 90 hospitals across seven countries, is preparing for a 2027 IPO. But while its revenue topped 701.2 billion won last year, its profitability remains weak, with just 8.1 billion won in operating profit.

The proposed solution? Fold CHA Cares—a smaller but reliably profitable hospital services firm—into CHA Healthcare, smoothing out the financial volatility ahead of its IPO. CHA Biotech frames the merger as a “strategic recalibration,” aligning steady operating income with a business that, while expansive, has struggled with profitability.

But the structure of the deal raises questions. CHA Cares is 80 percent owned by the CHA family and its affiliates. Investors are questioning whether this corporate reshuffling is designed to strengthen the business or simply consolidate insider control before the IPO.

The company says the merger will strengthen CHA Healthcare ahead of its IPO and position it for long-term growth. “We don’t need to hold over 70 percent when CHA Healthcare goes public," the spokesperson explained. "The goal is to sell down our stake, recover our investment, and strengthen our asset value while bringing in top-tier Asia-Pacific investors.”

Matica Biotechnology: a long shot or a future cash cow?

CHA Biotech is putting 20 billion won from the rights offering into Matica Biotechnology, its CGT-focused CDMO in Texas.

For years, Matica has burned cash without turning a profit, leading some investors to question why the company is doubling down on the CDMO business now.

But CHA Biotech described 2024 as the "turning point," pointing to Matica’s first GMP manufacturing contract and more than 10 billion won in orders. The company expects 2025 to be even stronger, with revenue more than doubling.

“This isn’t about chasing short-term gains,” the CHA Biotech spokesperson noted, pointing to Precedence Research’s projection that the CGT market will grow at an average annual rate of 18.6 percent, reaching 117.5 billion dollars by 2034. “It’s a long-term play, and we’re confident the returns will justify the investment.”

The spokesperrson added that Matica gives CHA Biotech a crucial U.S. manufacturing foothold, a built-in hedge against shifting trade policies. If “America First” economics make a comeback, companies without domestic production could find themselves at a disadvantage. But with operations already running in Texas, CHA Biotech positions Matica as a local player—not a foreign manufacturer vulnerable to new restrictions.

CHA Biotech is trying to execute a high-risk, high-reward strategy, funneling billions into hospitals, CDMO operations, and CGT R&D.

“Why now, and why this much?” has been the recurring question from investors, who argue that 250 billion won is excessive for a company with less than a 700 billion won market cap.

The company concedes that after adjustments, the actual proceeds will "likely be closer" to 200 billion won. But waiting for better market conditions, it argues, is not an option.