TS Trillion Major Shareholder Files for Bankruptcy
Trading Halt Leaves Small Shareholders 'Perplexed'
The hearing date for the petition demanding a 'bankruptcy declaration' of TS Trillion, famous for its 'hair loss shampoo,' will be held on the 25th. The petitioner is former TS Trillion CEO Jang Ki-young, the founder and largest shareholder, who is currently in a management rights dispute with the current management. Small shareholders, suddenly faced with bankruptcy filings and trading suspensions, are unable to hide their bewilderment.
According to the legal community on the 23rd, the 17th Division of the Seoul Rehabilitation Court will hold a hearing at 3 p.m. on the 25th for the bankruptcy petition filed by former CEO Jang, who requested a decision to "declare the bankruptcy of TS Trillion." Accordingly, the court is expected to review the submitted application documents from Jang's side and, if necessary, interrogate the representative to decide whether to declare bankruptcy.
On the 12th, the Korea Exchange suspended trading of TS Trillion's shares citing "unresolved rumors (bankruptcy petition by creditors)" among other reasons. Although TS Trillion issued a confirmed response stating that it had "confirmed the bankruptcy petition filed by creditors as of the 11th," trading of the stock remains impossible to this day. Corporate bankruptcy is a procedure where the court declares bankruptcy when a corporate debtor who borrowed money from creditors cannot repay the debt, liquidates assets, and distributes them to creditors in order of priority. Assuming bankruptcy is accepted, it takes about one to two months from the petition to the declaration decision.
However, the cause of this bankruptcy petition is attributed to a management rights dispute. TS Trillion, which was listed on the KOSDAQ in 2020, recorded net losses for three consecutive years starting in 2021. During this process, former CEO Jang sought to sell management rights and, in June last year, signed a contract to transfer management rights and part of his shares?40 million shares?for a total of 30 billion KRW, at 750 KRW per share.
However, the plan for NW Investment Partners to acquire 17 million shares fell through, and new investors reduced the acquisition scale, creating variables. Additionally, investors who purchased shares from former CEO Jang dumped the shares back into the stock market to realize capital gains. As a result, TS Trillion's stock price, which had soared to 2,025 KRW per share (closing price) on July 3 last year, plummeted, and the closing price just before the recent trading suspension was only about 356 KRW.
Former CEO Jang stepped down from his position in December last year. Early this year, he attempted to return himself and the previous management through an extraordinary general meeting of shareholders, but failed due to a lack of quorum. Subsequently, he filed a lawsuit against the company demanding payment of 8.4 billion KRW he had lent while serving as CEO.
The current management countered, stating, "It was a loan contract without a fixed repayment period. Creditor Jang should not unilaterally demand repayment but should negotiate to request repayment." The first hearing for the lawsuit regarding the 8.4 billion KRW loan claim is also scheduled to be held on the same day as the bankruptcy petition hearing, at the Seoul Southern District Court Civil Division 15.
Small shareholders, who have faced a stock price crash followed by a trading suspension, are expressing frustration. This is because a bankruptcy petition can lead to delisting in some cases. Due to consecutive net losses, the current management's capital raising plan through a proposed rights offering has also been halted. This is because former CEO Jang filed a 'provisional injunction to prohibit new share issuance' against the company last month, along with various lawsuits.
Accordingly, the DS Association, which was to become the largest shareholder by subscribing to a 20 billion KRW rights offering from TS Trillion, changed its original plan and paid only 3.5 billion KRW. The DS Association stated, "Due to the provisional injunction, bankruptcy petition rumors, and trading suspension, creditors' anxiety has intensified. Judging the investment risk to be high, we decided to invest only a portion of the originally planned amount, far less than initially intended."
Meanwhile, a TS Trillion official said, "We plan to strongly respond through legal procedures to protect the rights of minority shareholders and company stakeholders against the largest shareholder's lawsuit."
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