[At a Crossroads] Where Are the Investors in F&Republic's Paid-in Capital Increase?

Delayed Capital Increase Payment for 1 Year, Penalty Points Received
Major Shareholder Possible but No Investors
Company Continues Losses... Cash Also Depleted

[Asia Economy Reporter Jang Hyowon] The paid-in capital increase of F&Republic, a KOSDAQ-listed company, has been delayed again. Despite the fact that this capital increase would allow an investor to become the largest shareholder of F&Republic, no investor has appeared.

According to the Financial Supervisory Service's electronic disclosure on the 30th, F&Republic changed the payment date for the third-party allotment paid-in capital increase worth 9.7 billion KRW to February 28, 2023. The original payment date was until that day. The company stated, "We will prepare to ensure there are no further schedule delays."

This capital increase was initially decided on December 6 last year. At that time, F&Republic announced it would issue 10.3 billion KRW worth of shares at 1,718 KRW per share through a third-party allotment. The issuance target was KaiEn 1st Association, with the payment date set for March 31.

However, as the payment date approached, F&Republic extended the payment date. Subsequently, the payment date was postponed four more times, and the new share issuance price and capital increase scale were adjusted. This was because F&Republic's stock price declined during the delay of the capital increase. Nevertheless, the capital increase was postponed again this time.

Due to the delay in the capital increase, F&Republic was designated as a non-compliant disclosure corporation on the 9th and received penalty points. According to KOSDAQ regulations, if the payment date of a third-party allotment paid-in capital increase is changed by more than six months, penalty points are imposed. If the accumulated penalty points reach 15 or more within a year, the company is subject to a substantial review of listing eligibility.

Along with the delay in the capital increase, F&Republic was penalized with 9 points and a disclosure violation fine of 54 million KRW due to the cancellation of the stock transfer agreement involving a change of the largest shareholder and the cancellation of the shareholders' meeting convening resolution. An additional 4.5 points could have been imposed, but this was replaced with a fine of 18 million KRW.

The reason for the repeated postponement of the capital increase is interpreted as the absence of investors willing to acquire F&Republic. If this capital increase proceeds, 6,788,364 new shares will be issued. This is a large volume equivalent to 50% of the total issued shares of F&Republic.

Currently, the largest shareholder of F&Republic is F&Cosmedics, holding 1,078,516 shares (9.81%). Even combining the shares of CEO Oh Chang-geun of F&Republic at 3.56%, Wang Teng at 1.79%, and Director Fan Na at 1.7%, it amounts to only 14.99%. With 9.7 billion KRW, one could become the largest shareholder of F&Republic.

F&Republic is a company that distributes cosmetic brand JayJun and clothing brand NERDY. Although it posted decent results such as surpassing 100 billion KRW in sales and 10 billion KRW in operating profit in 2018, its performance sharply declined from 2019, with sales shrinking to 30.3 billion KRW and operating losses of 7.9 billion KRW last year.

In the third quarter of this year, cumulative sales were 11.4 billion KRW, a 35.7% decrease compared to the same period last year. Net losses also reached 2.6 billion KRW, and accumulated deficits amount to 94.3 billion KRW. Additionally, the cash on hand is only about 300 million KRW.