[At a Crossroads: Listed Company] ① '5 Years of Losses' Glovon, CEO Hansangho Exits with Double Returns

(Photo by Glovon)

[Asia Economy Reporter Jang Hyowon] Han Sangho, the largest shareholder and CEO of KOSDAQ company Glovon, is selling the company about seven years after acquiring it. The sale price is more than double the acquisition price. CEO Han will realize a large capital gain from the sale. However, since Han acquired Glovon, the company has continuously recorded losses and its management condition has deteriorated.

According to the Financial Supervisory Service's electronic disclosure on the 15th, CEO Han Sangho signed a contract on the 31st of last month to sell 4 million shares of Glovon and full management rights for 20 billion KRW. The sale price is 5,000 KRW per share, about twice the closing price of 2,520 KRW the day before the contract. This means a management premium of about 100% was recognized.

In February 2015, when Glovon was still named Veritas Investment (its former name), Han purchased 4,276,706 shares (22.92%) on the market at 1,650 KRW per share, totaling 7.057 billion KRW. At that time, the purpose of acquiring the shares was not for management participation, so in the capital market, Han was seen as a 'white knight' for the existing major shareholder.

However, in November of the same year, Han acquired 500,000 shares from the former largest shareholder SBI Korea Holdings at 2,270 KRW per share, totaling 1.135 billion KRW, thereby taking over management rights. This means he is selling the company he bought for about 8.2 billion KRW for 20 billion KRW, yielding a return of about 143%.

Han is a well-known figure in the mergers and acquisitions (M&A) industry. After acquiring management rights of H&H Global Resources in 2007, he sold it in 2013 to GemVax & Kael, a KOSDAQ-listed company. He also acquired 3H, the predecessor of Coson, a cosmetics original design manufacturing (ODM) specialist, in 2007 and sold it in 2012.

At that time, Veritas Investment specialized in mezzanine investments such as convertible bonds (CB) and bonds with warrants (BW) of domestic listed companies, as well as venture capital investments. It also operated a distribution business exporting domestically produced smartphones.

After acquisition, Han changed the company name to Glovon and started a cosmetics business. Glovon launched the brand ‘RUE KWAVE’ to ride the Korean Wave (Hallyu). The brand targeted female customers in China, Southeast Asia, and the Middle East who favor Korean culture.

However, the performance was poor. In the first year after acquisition, 2016, sales were 15 billion KRW with an operating loss of 5.8 billion KRW. In 2017, sales sharply dropped to 7.1 billion KRW and operating losses widened to 6.9 billion KRW. In 2018, the company turned a profit with an operating income of 1.6 billion KRW but recorded an operating loss of 4.7 billion KRW the following year.

Since then, losses continued in 2020 and last year. During this period, Glovon attempted to enter the hydrogen and plant business by acquiring shares in plasma technology company Green Science, but withdrew the acquisition after sales sharply declined within about a year.

Glovon has recorded cumulative losses up to the third quarter of this year. As of the end of Q3, Glovon's cumulative sales and operating loss were 14.4 billion KRW and 3 billion KRW, respectively. With accumulated deficits reaching 86.1 billion KRW, if Glovon continues to record losses this year and does not receive regulatory relief from the Korea Exchange (KRX), it will be listed as a management target for four consecutive years due to continuous losses.

Meanwhile, in the current transaction of Glovon's management rights and CEO Han's shares, a contract deposit of 2 billion KRW and a transaction of 400,000 shares were made on the contract day. The remaining payment of 8 billion KRW is due on the 30th, and the final payment of 10 billion KRW is expected in December, upon which the entire transaction will be completed.