Selfie Global with 20% Small Shareholders... Overcoming Wounds of 'No-Capital M&A'

Shareholders Keep Gathering... Temporary General Meeting Scheduled
Changing Management and Starting Company Normalization

Shareholders of Selfie Global, whose trading has been suspended due to a leveraged M&A group, have formed a consortium and become the largest shareholders. The shareholder consortium plans to quickly restore the company to normal by holding a general meeting of shareholders to oust the current management and report suspicions such as embezzlement.

According to the Financial Supervisory Service's electronic disclosure system on the 19th, Selfie Global Shareholders Consortium No. 1 announced that its shareholding ratio increased from the previous 14.71% to 19.63%. Currently, existing shareholders continue to invest in the consortium, so the shareholding ratio is expected to increase further.

Selfie Global Shareholders Consortium No. 1 became the largest shareholder of Selfie Global on the 9th of last month. Although more than a year has passed since the trading suspension, shareholders united their strength because they judged that the current management was not making proper efforts to resume trading.

The shareholder consortium immediately took action. The day before, they filed a provisional injunction to inspect the accounting books at the court and plan to soon request an extraordinary general meeting to replace the management.

Selfie Global is a credit card manufacturing company established in November 1998. It operates its business with manufacturing certifications from global card companies such as Visa, MasterCard, JCB, Union Pay, AMEX, and the Korea Financial Telecommunications & Clearings Institute. Its main customers are banks and card companies.

There are only four companies in Korea capable of manufacturing credit cards. Selfie Global has stably operated in the credit card manufacturing market for decades. Even in the situation where the company’s trading was suspended last year, it recorded sales of 34.3 billion KRW, showing only a slight decline compared to the previous year, and its operating profit remained in the black, demonstrating solid business fundamentals.

In fact, an industry insider said, “Selfie Global’s business content and technological capabilities are commendable, and there was a time when we considered acquiring it,” adding, “We are watching the process of the company’s normalization.”

The reason such a high-quality company’s trading was suspended is due to the leveraged M&A group. The largest shareholder of Selfie Global changed from the founder to Company A in August 2022. Company A acquired 15.94% of Selfie Global’s shares for 19.1 billion KRW, of which 18.3 billion KRW was borrowed funds.

Company A was a small corporation with total assets of 700 million KRW. Unable to handle the large borrowings, Company A transferred its shares to Company B just one month after the acquisition. However, Company B also borrowed the entire acquisition fund of 19.1 billion KRW. The lender was the same loan company as Company A.

After acquiring Selfie Global, they established a new corporation claiming to engage in the secondary battery business and transferred tens of billions of KRW. As a result, Selfie Global’s stock price soared from the 2,000 KRW range to the 5,000 KRW range. However, the stock price fell again, and when it dropped back to the 2,000 KRW range, the loan company conducted forced sales of most of Company B’s shares.

Ultimately, Selfie Global received a disclaimer of opinion in its 2022 audit report and was suspended from trading at the 700 KRW level in March last year. The basis for the disclaimer was the inability to verify the validity of investment transactions in subsidiaries and affiliates established for the secondary battery business. Transactions with related parties and internal controls related to funds were also problematic.

The market views Selfie Global as a typical case of the adverse effects of leveraged M&A. Leveraged M&A, which involves acquiring a company with borrowed funds without equity capital, is not illegal in itself. However, since most use high-interest short-term bonds, problems arise as company funds are siphoned off to repay loans or short-term speculative gains are sought through stock price manipulation.

Yang Tae-jung, lead attorney at Law Firm Gwangya, stated, “When embezzlement and stock price manipulation occur due to leveraged M&A, minority shareholders suffer significant damage, but under the current system, investigations and prosecutions take a long time,” adding, “It is necessary to expand dedicated divisions within investigative agencies and financial authorities to handle such crimes and to introduce mechanisms that can detect and intervene in advance.”