Legal Battle Ends in 'Not Guilty' After 4 Years
iM Taxi Operator Jinmo Mobility Discusses Merger... Also Pursuing 100 Billion Won Investment
Potential Acquisition Candidates Include FortyTwoDot, The Swing, and Uti
The former executives related to the vehicle call service 'Tada,' which was embroiled in illegal controversy, have been finally acquitted by the Supreme Court after four years. Although the so-called 'Tada Prohibition Act' prevents the service from operating exactly as before, attention is focused on whether the merger and acquisition (M&A) discussions of VCNC, the operator of Tada, will accelerate.
The Supreme Court's 3rd Division (Presiding Justice Oh Seok-jun) on the 1st upheld the original acquittal ruling by dismissing the appeal against Lee Jae-woong, former CEO of Socar, and Park Jae-wook, former CEO of VCNC, who were indicted for violating the Passenger Transport Service Act. The corporations Socar and VCNC, which were also indicted, were acquitted as well.
On the same day, former CEO Lee Jae-woong wrote on Facebook, "The Supreme Court has finally confirmed that innovation is not a crime," expressing regret that "politicians siding with vested interests fearful of innovation changed the law to suppress innovation over the past four years, causing many people who were building a new innovation ecosystem to lose their jobs." He added, "Cursing entrepreneurs who create innovation, prosecuting them, and changing laws to protect vested interests must end with this case," and "I will support innovation that increases public convenience to the best of my ability behind the scenes."
On the 5th, as the enforcement of the Passenger Transport Service Act amendment, known as the Tada Ban Act, approaches, a 'Tada' vehicle is parked at a garage in Yeongdeungpo-gu, Seoul. Photo by Moon Honam munonam@
The controversial Tada Basic was a core business model of Tada, a service that allowed customers to rent an 11-seater van with a driver through a smartphone application. VCNC operated by renting vehicles from Socar and then leasing them again to customers along with drivers.
When the service launched in October 2018, the taxi industry opposed it as an "illegal call taxi." Large-scale protests and legislative amendments followed, and a taxi driver self-immolated near Seoul Plaza, resulting in death. Prosecutors viewed Tada Basic as "illegal call taxi operations" prohibited under the old Passenger Transport Service Act and indicted former CEOs Lee and Park without detention in October 2019. Tada argued that it was a legal business involving car rental including driver dispatch, leading to a legal battle.
Shedding the Label of 'Illegal Service'... In Merger Talks with Jin Mobility
With the Supreme Court's acquittal, Tada can now shed the label of an illegal service. Currently, VCNC's main operation, 'Tada Next,' provides services with drivers holding premium taxi licenses using 7- to 9-seater vans, a different model from the former 'Tada Basic.'
With the legal dispute concluded, industry attention is turning to M&A. VCNC and Jin Mobility, operator of i.M taxi, are conducting merger discussions alongside investment attraction. The two companies are pursuing a plan to raise 100 billion KRW in new investment for a newly established merged entity operating a taxi brokerage platform. The investment is reportedly being handled by Oceanfront, a newly established private equity fund (PEF), currently recruiting institutional investors (LPs).
It is analyzed that i.M taxi and Tada decided to join forces, judging that independent survival is difficult due to low market share and insufficient vehicle numbers. If the merger proceeds as planned, Jin Mobility will become the largest shareholder of the new merged entity, Oceanfront will be the second-largest shareholder, and Viva Republica (Toss), the largest shareholder of VCNC, will be the third-largest shareholder.
Viva Republica, VCNC’s Largest Shareholder, Holds the Reins
Currently, Jin Mobility appears to have the upper hand, but variables remain. Some speculate that shared electric scooter company 'The Swing' and 'Wooty,' a joint venture between Uber and T Map Mobility, may enter the Tada acquisition race. There is also speculation about the possibility of Hyundai Motor Group’s autonomous driving company '42dot' acquiring Tada, but 42dot has denied this, calling it "groundless."
The key issue is to whom and at what price Viva Republica will sell its stake. Previously, in October 2021, Viva Republica acquired 60% of VCNC’s shares. From Toss’s perspective, which operates mainly around Toss Bank, expanding the payment system is an essential condition. Attention is focused on what decision will be made considering synergy effects.
Tada’s current financial situation is not abundant. Even if the currently prominent deal between VCNC and Jin Mobility is completed, it is pointed out that it will be difficult to establish self-sustainability. As of the end of last year, VCNC’s cash equivalents (including short-term financial products) stood at 9.1 billion KRW, a fifth of the previous year’s 47.2 billion KRW.
VCNC and Jin Mobility Lack Financial Capacity
Combining VCNC’s 9.1 billion KRW in cash equivalents with Jin Mobility’s approximately 7.7 billion KRW totals about 16.8 billion KRW, which is incomparable to Kakao Mobility (390.6 billion KRW), T Map Mobility (379.8 billion KRW), and Wooty (62.3 billion KRW). Even if the two companies merge, their financial capacity remains insufficient. Both companies realistically need to attract investment.
If they proceed with their plan to raise 100 billion KRW in new investment for the newly established merged entity, VCNC will be left only with the franchise taxi (Tada Lite) business, as the taxi brokerage platform will be transferred to the new merged entity. The problem is that they lack the strength to grow Tada Lite. Therefore, they must also consider separate capital expansion.
An investment banking industry insider said, "Although Tada’s service is a captive market (monopoly or oligopoly), it is indeed attractive as a future-oriented service," adding, "Considering the financial resources, the possibility of Hyundai Motor Group affiliate 42dot entering the race cannot be ruled out."
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