Qoo10 Group head Ku could lose control of key subsidiary

Qoo10 Group CEO Ku Young-bae. [Photo by Han Joo-hyung]

Qoo10 Group CEO Ku Young-bae is close to losing control of Qxpress, a key subsidiary of the South Korean group’s Singapore operations. This development comes as Qoo10 Group moves to sell its Korean subsidiaries WeMakePrice, Interpark Commerce, and AK Mall, while Qxpress in Singapore is set to operate independently.

Ku is now facing a difficult situation as key stakeholders and financial investors of Qxpress are actively considering taking over the management of the company.

According to investment banking industry sources on Thursday, Qxpress’s major shareholders and FIs are exploring ways to acquire control., they could reduce the Qxpress shares owned by Qoo10 and Ku (about 95 percent) to less than 50 percent by using exchangeable bonds (EB) and convertible bonds (CB) held by the FIs.

Multiple FIs invested around 160 billion to 170 billion won ($124.4 million) in Qxpress between 2019 and 2021. Crescendo Equity Partners invested 60 billion won in preferred shares in 2019, while Corstone Asia and Metistone Equity Partners invested 30 billion won and 28 billion won in EB respectively in 2021. Cactus Private Equity and KDB PE also invested around 50 billion won in CB in 2021.

If Crescendo, which holds preferred shares, converts them into common shares, it would secure about 34.2 percent of Qxpress’s shares. If other FIs follow suit by converting or exchanging their bonds, the FI consortium could own over 50 percent of Qxpress’s shares. “We are discussing ways to reduce Ku’s shareholding below 50 percent,” an FI insider said.

The FIs are taking this action to distance themselves from the payment delay issues involving TMON and WeMakePrice. According to multiple FIs, Qoo10 Group accounted for only about 20 percent of Qxpress’s sales as of the end of 2023. Qxpress primarily handles logistics for direct purchase products in Southeast Asia, Japan, and Korea, with eBay Japan among its key clients alongside the Qoo10 Group.

The relationship between TMON/WeMakePrice and Qxpress is minimal. According to the Financial Supervisory Service, WeMakePrice’s transactions with Qxpress amounted to only 1.2 billion won in 2023. “TMON/WeMakePrice accounts for less than 1 percent of Qxpress’s sales,” a second FI source said.

Amid this scenario, the FIs are moving to strip Ku of his management rights as Qxpress faces reputational damage due to the TMON/WeMakePrice incident. Qxpress’s board held a meeting on June 27th, 2024, shortly after the incident, to remove Ku as CEO and appoint CFO Mark Lee as his successor.

If the FIs successfully take over management from Ku, it will impact Ku’s plan to sell Qoo10 Group shares to repay outstanding settlement funds. Prospective buyers might be interested in acquiring not only Qoo10 but Qxpress’s management rights as well. But buyers might only be able to obtain minority stakes in Qxpress if the FIs secure control of Qxpress.

Industry insiders suggest that various scenarios are still being discussed among the FIs, so the final outcome remains uncertain.

Additionally, Qoo10’s Korean subsidiaries, including WeMakePrice, Interpark Commerce, and AK Mall, are also undergoing sale procedures. But with TMON/WeMakePrice operations virtually halted and settlement delays affecting Interpark Commerce and AK Mall, securing collateral loans or successful sales is proving to be a challenge.

Qoo10 reportedly approached AliExpress and Temu for the sale, but both companies denied any interest. The IB industry is noting that even 11Street, a larger entity than TMON/WeMakePrice, saw its corporate value plummet from 3 trillion won to 500 billion won with no buyers. Given this context, finding a buyer for TMON/WeMakePrice, which is losing over 100 billion won annually and facing capital erosion, seems unlikely.

“The Korean e-commerce market is already dominated by Naver and Coupang, with Chinese platforms increasing their market share. Mid-sized e-commerce companies are finding it challenging to attract buyers in this environment,” a senior IB industry official said.