[비즈한국] At the center of the TMON and WeMakePrice settlement crisis lies the ambition of Qoo10 Group CEO Ku Young-bae, who sought to take his core subsidiary, Qxpress, public. The current situation arose because, in an effort to increase Qxpress’s workload and scale, he pushed ahead with aggressive mergers and acquisitions (M&A) despite a lack of funds. Among the companies brought under Qoo10’s umbrella are not only e-commerce firms but also logistics companies, and the financial health of these logistics firms has also turned red since their acquisition.
While preparing for Qxpress’s Nasdaq IPO in the U.S., CEO Ku acquired companies in various fields. Due to limited capital, he acquired these companies by receiving investments from financial investors (FI) or by exchanging equity and bonds with the shareholders of the target companies. The e-commerce acquisitions included TMON, WeMakePrice, Interpark Commerce, AK Mall, and the U.S.-based Wish; prior to that, he also secured the freight forwarding (cargo transport arrangement, agency, and management) division of a global logistics company.
In October 2021, Qoo10 acquired the Cochina Logistics corporation, the forwarding arm of the Cochina Group, through Qxpress. Cochina Group, led by Chairman Park Bong-chul, is a Hong Kong-based "Hansang" (overseas Korean) logistics company. With the goal of strengthening B2B logistics, Qoo10 purchased 40 legal entities across 15 countries under Cochina Logistics for approximately 100 billion won, alongside private equity (PE) investors.
At the time, Qxpress expected synergies with Cochina Logistics, stating, "We can now efficiently provide global logistics services that encompass both B2B and existing B2C divisions, centered on overseas direct purchases." After being brought into Qoo10, Cochina Logistics changed its name to KC International Korea in July 2022. On July 10, 2023, Kim Young-sun, CEO of Qxpress Korea, was appointed as an internal director of KC International Korea and subsequently held the CEO position concurrently.
The parent company of KC International Korea is KC International Holdings, and the intermediate holding company is the Singaporean entity, Qxpress Pte Ltd. The next level up is the Qoo10 Singapore entity (Qoo10 Pte. Ltd.), with the top parent company being Giosis Holdings (now Qoo10 Technology). CEO Ku Young-bae is the largest shareholder of Giosis Holdings and stands at the pinnacle of the governance structure.
Since being acquired by Qoo10 in 2021, KC International Korea has seen an increase in revenue, but its profitability has deteriorated. Sales rose from 25.1 billion won in 2021 to 36.2 billion won in 2022, but during the same period, operating profit swung from a profit of 1.4 billion won to a loss of 200 million won. Net profit also fell from 1.1 billion won to a loss of approximately 60 million won. The audit report for KC International Korea has only been disclosed up to the 2022 fiscal year.
A look at the company’s financial status reveals a notable increase in trade receivables and allowance for bad debts. Trade receivables are claims received after selling goods or services on credit, representing money that must be collected from the counterparty. The allowance for bad debts is an expense entry for trade receivables deemed uncollectible, and it serves as an indicator for assessing financial health. In 2021, KC International Korea’s trade receivables were 7.8 billion won and the allowance for bad debts was around 80 million won, but these surged to 13 billion won and 800 million won, respectively, in 2022.
This was influenced by an increase in transactions with related parties, including Qxpress. Sales to related parties rose from 12.6 billion won in 2021 to 20.8 billion won in 2022, while trade receivables from them grew from 5.4 billion won to 11.7 billion won. Consequently, the proportion of sales to related parties out of total revenue increased from 43% in 2021 to 56% in 2022. This means that while sales to parent and related companies grew, the portion of credit that must be collected from them also increased.
Hanwool Accounting Corporation, which audited KC International Korea, also pointed out this situation. The emphasis of matter in the audit report states, "During the reporting period (2022), sales and purchase transactions with related parties amounted to 20.8 billion won and 2.5 billion won, respectively, and after the reporting period, receivables and payables to related parties were 11.8 billion won and 2.6 billion won, respectively," and noted that "there may be uncertainty regarding the collectibility of receivables, etc., depending on the future business conditions of the related parties."
It appears that the debt Qxpress owes to KC International Korea also increased last year. According to Qxpress Korea’s audit report, trade payables to KC International Korea (liabilities incurred by purchasing goods or services on credit) rose from 1.6 billion won in 2021 to 9.5 billion won in 2022, and 10.9 billion won in 2023. Conversely, trade receivables to be collected from KC International Korea stood at only 700 million won as of 2023.
However, Qxpress has stated that there are no problems with its operations following the TMON and WeMakePrice settlement crisis. In a notice on July 26, the company stated, "We are fully aware that there are concerns regarding Qxpress services," and "We reaffirm that Qxpress continues to provide normal cross-border and domestic logistics services without change." On the same day, the Qxpress Singapore headquarters appointed CFO Mark Lee as the new CEO, appearing to quickly distance itself from risks associated with CEO Ku.
Meanwhile, it was found that Qoo10 actively used the cash of the companies it acquired. Qxpress Korea lent 116.8 billion won, Interpark Commerce 28 billion won, and WeMakePrice 13.1 billion won to the Qxpress Singapore entity. Previously, during the National Assembly National Policy Committee hearing on July 30, controversy erupted when CEO Ku Young-bae admitted that proceeds from TMON and WeMakePrice sales had flowed into the 230 billion won acquisition cost of Wish.