[Post-IPO] TS Trillion Pays Dividends Despite 'Losses'... CEO Jang Ki-young's Family Benefits⑤

[Asia Economy Reporter Jang Hyowon] It has been confirmed that TS Trillion, a KOSDAQ-listed company that produces the hair loss shampoo ‘TS Shampoo,’ proceeded with dividends last year despite posting a loss. The company paid dividends amid declining performance and ongoing lawsuits. Most of these dividends were received by Jang Gi-young, CEO of TS Trillion, and his family.

Jang Ki-young, CEO of TS Trillion.

Losses and Lawsuit Defeat... Yet ‘Dividends’ Were Paid

According to the Financial Supervisory Service’s electronic disclosure on the 9th, TS Trillion recorded a net loss of 2.5 billion KRW on a separate basis last year but still paid approximately 500 million KRW in dividends. This resulted in a dividend payout ratio of -20%. The dividend payout ratio refers to the proportion of dividends relative to net income. Because dividends were paid despite the loss, the payout ratio was negative.

Typically, companies pay dividends to share profits with shareholders when they generate earnings. Conversely, when a company faces difficulties or needs to invest for the future, it focuses on retaining earnings rather than paying dividends. However, TS Trillion paid dividends despite posting a loss.

TS Trillion recorded poor performance last year. As of the end of last year, sales and operating profit were 60.6 billion KRW and 3.4 billion KRW, respectively, down 12.6% and 22.7% compared to the same period the previous year. This showed a significant gap from the forecast of 67.9 billion KRW in sales and 6.8 billion KRW in operating profit announced by the company just a month before the December listing, shocking the market.

The decline in performance is analyzed to be due to the failure to launch standout products amid fierce competition in the hair loss shampoo market. In fact, TS Shampoo showed growth from 2015 but did not invest in research and development (R&D) at all until 2019. From 2019, it spent around 200 million KRW on R&D, which was less than 1% of total sales. On the other hand, it spent about 10 billion KRW on advertising, focusing heavily on marketing.

With operating profit decreasing, last year’s merger costs and provisions for litigation liabilities led to a net loss. The merger costs arose from TS Trillion’s listing on the KOSDAQ market through a merger with ‘HiJe4th SPAC’ at the end of last year.

The litigation provision was made due to a lawsuit lost against the processed food wholesaler Daehan Gukmin Geongang filed in 2019, which required setting aside compensation in advance.

At that time, TS Trillion was sued for unfairly terminating an exclusive sales contract in China with Daehan Gukmin Geongang and lost in the first trial. The case was settled in April when TS Trillion paid a settlement of 750 million KRW.

CEO Jang Gi-young’s Family Takes Three-Quarters... Teenage Children Become Shareholders

Most of the dividends paid amid poor performance and litigation risk were received by CEO Jang Gi-young and his family.

As of the end of last year, Jang and his family held 76.02% of TS Trillion’s shares. Considering that the average shareholding ratio of major shareholders in listed companies is around 30%, this is a very high level. More than three-quarters of the total dividends went to Jang and his family.

Notably, Jang’s teenage children also received dividends. As of the end of the third quarter this year, Jang’s two children held 2,245,685 shares (2.47%) and 1,497,591 shares (1.65%), respectively. In terms of share value, they are asset holders with stocks worth approximately 1.9 billion KRW and 1.3 billion KRW.

They have held shares since the early days of TS Trillion’s founding and have received dividends. According to the audit report, TS Trillion has paid dividends ranging from 8% to 59% of net income annually since 2014. Through this, it is estimated that CEO Jang was able to increase his children’s wealth without gift tax. While gift tax can be imposed up to 50%, dividend income tax is only 15.4%.

TS Trillion was contacted multiple times for comment but did not respond.

Meanwhile, TS Trillion continues to experience poor performance since its KOSDAQ listing last year, recording an operating loss of 3.6 billion KRW as of the end of the third quarter this year.