TMON, WeMakePrice submit restructuring plans amid Qoo10 CEO's merger push

Industry

TMON, WeMakePrice submit restructuring plans amid Qoo10 CEO's merger push

Published: 12 Aug. 2024, 19:12 Updated: 13 Aug. 2024, 18:44

KIM JU-YEON
kim.juyeon2@joongang.co.kr

Merchants affected by delayed payments from TMON and WeMakePrice hold up signs with text demanding relief measures at the inaugural ceremony of the emergency committee created for the sellers' damage relief on Aug. 6. [YONHAP]

TMON and WeMakePrice submitted restructuring plans to the Seoul Bankruptcy Court on Monday, amid skepticism over Qoo10 CEO Ku Young-bae’s proposal announced last week to merge the two cash-bleeding platforms.

The submitted plans, which reportedly outline the e-commerce platforms’ strategies to secure investment, pursue mergers and acquisitions (M&A) and restructure, will be reviewed by a rehabilitation council consisting of related state authorities and creditors on Tuesday.

The two companies had been approved for a restructuring support program, also called an ARS program, that allows them to initiate the restructuring process without entering receivership for a grace period of up to three months.

“Its key content includes ways to attract investment from structural regulation funds and repay debts to creditors, and later rapidly normalize operations so that [the platforms] can be resold within three years,” WeMakePrice CEO Ryu Hwa-hyeon told local media reporters outside of the Seoul court, referring to the plan to draw in investors intending to fix management issues and profit from capital gains after the company’s market value recovers.

Ryu said the submitted plan does not include the Qoo10 CEO’s proposal to merge TMON and WeMakePrice under a new business entity, which has been slammed by merchants listed on the two platforms for being “impractical." The sellers’ endorsement is essential in the execution of the plan, as it is dependent on their willingness to exchange their unpaid earnings for convertible bonds.

Qoo10 CEO Ku Young-bae arrives at his residence on Aug. 1 to cooperate with prosecutors' on-site investigation. [YONHAP]

An unsolicited merger proposal

The Singapore-based company said Friday that it applied to create a new business entity, called the K-Commerce Center for World (KCCW), on Thursday to proceed with a merger plan for the two ailing platforms to solve the liquidity crisis. The merger will have to be approved by the Seoul Bankruptcy Court.

The initial capital put forward for the KCCW is 100 won short of 1 billion won ($730,000). According to Ku’s plan, Qoo10 will cut its entire stake in TMON and WeMakePrice with the consent of shareholders. The CEO will hand over his entire 38 percent stake in Qoo10 as a blind stock trust to the KCCW. With the handover, Ku claims the new entity will be the holding company for the Qoo10 group and will grow into a global e-commerce platform that encompasses not only the Asian market but also the North American, European and Indian markets through subsidiaries Wish and Shopclues.

Ku’s plan is to make the unpaid merchants on TMON and WeMakePrice shareholders of the KCCW as part of a cooperative that will be the organization’s largest stakeholder. He claims that the sellers, as the holding firm’s largest stakeholder, will be able to command influence over the KCCW’s board of directors and management to create a marketplace where the sellers, platform and customers can mutually benefit. Business operations will be normalized and funds can be secured through the KCCW, according to the CEO.

Qoo10 started receiving applications from sellers listed on TMON and WeMakePrice to exchange their unpaid earnings for convertible bonds — fixed income securities that can be changed into shares — Friday. The company said it would conclude the first round of seller recruitment to form a shareholder cooperative by the end of August and ask the court to approve the merger; if it is approved, two more shareholder cooperatives could be formed sequentially.

A home electronics seller affected by TMON and WeMakePrice's liquidity crisis attends a meeting held by the Democratic Party at ETLand in Yongsan District, central Seoul on Monday. [NEWS1]

“It’ll be difficult to cover damages by selling TMON or WeMakePrice,” Ku said. “Merging the two platforms will make it the fourth-largest marketplace domestically. The merger will allow for a cut in costs and a transition to a business model that is oriented toward making profit, which will revive the value of the company and make it possible to secure investments or M&As, and also allow my stake to be used to cover damages.”

The Qoo10 founder had said it was agreed upon with TMON CEO Ryu Kwang-jin and the WeMakePrice CEO to discuss integration plans in the future while each company pursued their own rehabilitation measures.

Merchants give Ku’s plan the cold shoulder

In a statement on Monday, an emergency response committee consisting of unpaid TMON and WeMakePrice merchants opposed the creation of the KCCW, calling its establishment a “highly improbable plan that seems to be a scheme to avoid accountability and cover up numerous allegations.” This is in reference to assertions that Ku may be trying to save himself from the ongoing prosecutorial investigation into possible embezzlement, fraud and breach of duty related to Qoo10’s liquidity crisis.

Merchants who have had their payments delayed by TMON and WeMakePrice gather at an emergency meeting for the sellers' damage relief held at the National Assembly building in western Seoul on Aug. 6. [YONHAP]

“CEO Ku must reveal all of his assets and overseas financial assets tied to Qoo10 and Qxpress in a transparent manner to show his commitment to the plan,” the committee said, also asking for transparency with a specific amount for damages and a detailed disclosure of fund operations.

“CEO Ku should immediately give up all of his assets, including his 38 percent stake in Qoo10, to WeMakePrice and TMON so that payments to sellers and customer refunds can be processed in a normal manner, as well as for use to operate the new business entity, the KCCW.”

The committee further demanded that Qoo10 remove the notices for merchants on TMON and WeMakePrice that outlined the procedure to consent to shareholder participation.

BY KIM JU-YEON, LEE SU-JEONG [kim.juyeon2@joongang.co.kr]