2024-07-29 23:56:55
After Timon and WeMakePrice fell behind Coupang and Naver in the mobile e-commerce competition, they dreamed of making a comeback by joining hands with Quten, but it was revealed that it was not enough to overcome their worsening financial situation.
In particular, private equity funds (PEFs) that were major shareholders of Timon and WeMakePrice transferred their company shares to Quten and received Quten’s shares and bonds. The reason for this seems to have been revealed to some extent. Why did Quten acquire Timon and WeMakePrice, which were loss-making companies? And what did they expect from the stock and bond exchange with Quten?
When Quten acquired Timon in 2022, it provided Quten’s shares to KKR, the world’s No. 1 PEF, and Hong Kong-based Anchor Equity Partners on the condition that they acquire the company’s shares. When it acquired WeMakePrice in 2023, it was reported that Quten’s bonds were distributed to major shareholders such as IMM Investment.
KKR, Anchor Equity Partners, and IMM Investment are large PEFs operating domestically and internationally, and they prioritize returns. The reason they sold the company for Quten’s shares instead of cash is because they were desperate.
In 2022, when Timon was sold to Quten, the company had an operating loss of 152.7 billion won, and its total capital was minus 638.6 billion won, completely eroded. WeMakePrice also had an operating loss of 102.5 billion won and its total capital was minus 239.8 billion won in 2023, when the company was sold. It was also a complete capital erosion.
The two companies were still in a zombie state at the time of the sale. In fact, Timon borrowed money using future sales receivables as collateral to prevent a liquidity crisis before selling the company. Future sales receivables are used to secure funds by collateralizing the company’s future sales, and are considered a last resort in the investment industry. They tried selling it, but there were no buyers. They handed the company over to Quten when it was on the verge of closing down.
What did PEFs expect when they handed over their companies to Quten? First, they could postpone the recognition of losses. Even if Timon and WeMakePrice fail, there will be no investment losses. This is because they were converted into Quten’s stocks and bonds. In other words, there will be no investment losses until Quten fails.
The second is the existence of Q Express, a subsidiary of Quten. In fact, from the perspective of PEFs, Qten was not trustworthy as an e-commerce company. However, Q Express is a logistics company that generates steady profits. If Q Express were listed on NASDAQ, it was expected that the investment could be recovered through bonds, and the stock value of Qten could also increase.
It seems that Quten also had similar thoughts to PEF. Its strategy is to grow Qexpress rather than e-commerce. After acquiring Timon and WeMakePrice, Quten acquired AK Mall, Interpark Commerce, and Wish in the US. It said that it was a strategy to increase market share and increase economies of scale, but there was no actual integration work. Experts interpreted that the successive M&As were ultimately intended to increase Qexpress’s cargo volume and go public.
An investment bank (IB) official said, “Considering the results of many e-commerce M&As, such as Shinsegae’s acquisition of eBay, it is difficult to achieve synergy effects,” and “In order to realize economies of scale, sites and members need to be integrated. However, since e-commerce users overlap, integration is not very meaningful.”
What will be the state of Q Express in a situation where Timon and WeMakePrice could go bankrupt? An insider predicted, “Since 70% of Q Express’s volume is external volume, there will not be a big impact from this incident.”
When the Timon and WeMakePrice incident occurred, Koo Young-bae, CEO of Qxpress, stepped down from his position before announcing his position. This is interpreted as a precaution against possible risks during the listing. Will Qxpress be able to survive the Timon and WeMakePrice incidents? Will the PEFs be able to successfully recover their funds? It is no exaggeration to say that everything depends on the listing of Qxpress. Qxpress is currently preparing for a listing on the US Nasdaq by hiring a global IB, Goldman Sachs.
Reporter Lee Dong-hoon [email protected]
2024-07-29 23:56:55