Major Shareholder Couple Continues Daily Stock Sales to Cash Out
Compensation Payments Delayed for Previously Laid-Off Employees
[Asia Economy Beijing=Special Correspondent Kim Hyunjung] Guomei, China's largest home appliance retailer, is facing criticism after it was revealed that the company has stopped paying its employees' salaries. There are concerns that the company, once a leader in the industry, has fallen into ruin due to corruption issues involving Hwang Kwangwi, who was once considered a top candidate, and his family.
According to local media including the Chinese economic outlet Dongfang Caifu Wang on the 4th, Guomei recently held a general meeting and announced that the company will only provide social security benefits until the end of December and will not pay wages. Hwang Suhong, chairman of Guomei Electronics, explained, "There will be uncertainties regarding wage payments in the medium to long term," adding, "Employees may be required to sign a pledge to prepare mentally to work with the company through this difficult period."
The news attracted public attention, appearing as the top trending search term on major portals the previous evening. Chairman Hwang Suhong is the younger sister of Hwang Kwangwi, the founder of Guomei Group, and was appointed chairman of Guomei Electronics in the first half of this year.
Hwang Kwangwi started from a small clothing store and founded Guomei, a nationwide home appliance retail chain in China, at the age of 30 in 1999. He was a pioneering figure who appeared multiple times among the wealthiest in the 2000s. However, in 2008, he was sentenced to 14 years in prison on charges including management corruption, insider trading, and bribery, and was paroled in June 2020. Although he returned to management afterward, the company continued to face payment delays and large-scale layoffs, moving further away from normalization.
Meanwhile, the major shareholder family faced further criticism for selling company shares and cashing out. Before the wage suspension announcement, on September 14 and 15, Hwang Kwangwi and his wife Dujuan sold a total of 1.528 billion shares of the company in three transactions, cashing out 295 million Hong Kong dollars (approximately 53.5 billion KRW). Following the disclosure of this fact, Guomei's stock price plummeted by more than 20%, and as of September 21, it had fallen for seven consecutive trading days, with a total decline of 34%. The couple is reported to have cashed out a total of 960 million Hong Kong dollars since the end of last year, reducing their stake sharply from 61.5% to 42.8%.
According to Guomei's semi-annual report released in September this year, the company's total debt amounts to 58.567 billion yuan (approximately 11.38 trillion KRW). Of this, 22.92 billion yuan is classified as bank loans and other loans due within one year. Cash and cash equivalents amount to only 2.49 billion yuan, and operating cash flow during the same period shrank drastically to 55.35 million yuan compared to 2.14 billion yuan the previous year.
Based on the semi-annual report, Guomei's stores, including flagship stores, community stores, and new retail outlets, total 3,825 across China. However, according to the economic media Caixin, Guomei closed 90% of its stores in the third quarter, leaving fewer than 500 stores currently.
Internal employees, who have already experienced layoffs since June, appear to be resisting. One employee told local media, "Forcing us to sign such a document and not paying wages is illegal," adding, "No one will sign it." Some employees who left the company during the layoff process have yet to receive even the severance pay that was part of their resignation conditions.
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