SK dodges further investment in troubled online retailer 11Street

[11STREET]

SK Group is giving up on its affiliated online commerce platform, 11Street, as the retailer fails to go public amid deteriorating sales.

Chinese giant Alibaba emerges as front-runner to acquire 11st

SK square, the investment arm of SK Group holding 80.26 percent stake in 11Street, Korea's third-largest ecommerce platform, apparently will not exercise the call options of shares held by financial investors.

During its Wednesday board meeting, the company decided to forego the call options, which would have otherwise allowed it to repurchase 18.18 percent of 11Street held by financial investors such as private equity firm H&Q Korea, the National Pension Service and the Korean Federation of Community Credit Cooperatives. Reports indicate that skepticism within SK square's board emerged, questioning the prudence of investing significant sums to repurchase the debt-ridden ecommerce platform's stake. The call option's deadline loomed on Dec. 4.

In 2018, SK square secured a 500 billion won ($385.8 million) investment from financial investors in 11Street, contingent on the company going public within five years. Failing this, it had included a call option clause allowing SK square to buy back the stake.

As a result, the financial investors can exercise their drag-along right to sell 11Street, potentially paving the way for a forced sale process.

Negotiations for the sale of 11Street with the Singapore-based ecommerce platform Qoo10 hit a deadlock in September due to disparities in the company's valuation.

The competitive landscape of Korea's online retail market, influenced by the dominance of big players like Coupang and Naver, has led to a decline in 11Street's corporate value. Once estimated to be around 3 trillion won, the current valuation of the company is speculated to have plummeted to the 1 trillion won range.

Reflecting on the difficulties, 11Street recently started asking its workers to resign voluntarily, which is the first time the company has opened a voluntary resignation scheme since its launch in 2008.

Simultaneously, SK square is contemplating the merger of its video streaming platform Wavve with Tving, another streaming platform owned by CJ ENM. Upon completion, the merger is poised to create Korea's largest platform — viewed as a strategic response to the increasing dominance of international players like Netflix and Disney+ in the streaming market, which has adversely impacted the competitiveness of domestic companies.

Tving, Wavve streaming services may merge platforms, reports say

"We are discussing various partnership options," an SK square spokesperson said.

CJ ENM, holding a 48.85 percent stake in Tving, and SK square, with a 40.5 percent stake in Wavve, suggest that the merged entity is expected to have CJ ENM as the major shareholder, with SK Square becoming the second-largest shareholder.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]