[Gi-ro-ui Sangjangsa] THE E&M① Red Light on Vessel Financing Amid Turn to Deficit

Disruption in 20 Billion Funding Injection After Vessel Acquisition
Deo E&M Turns to Deficit, Capital Increase Also Canceled

[Asia Economy Reporter Jang Hyowon] The KOSDAQ-listed company THE E&M has returned to a deficit, casting a red light on the new funding for Vessel, which it recently acquired. According to the Financial Supervisory Service's electronic disclosure on the 17th, Vessel has changed the payment deadlines for the 7 billion KRW third-party allotment capital increase and the 13 billion KRW convertible bonds (CB) from March 15 to March 31.

The 7 billion KRW capital increase target is Moet 1st Investment Association. The largest shareholder of Moet 1st Investment Association is THE E&M. The representative partner is Kim Taegyu, head of THE E&M's Strategic Planning Team. Kim was also appointed as an inside director of Vessel at the extraordinary general meeting held on the 8th.

The CBs are issued to Lukro 1st Investment Association with 10 billion KRW and Rob Partners with 3 billion KRW. The largest shareholder of Lukro 1st Investment Association is an employee of THE E&M. Currently, the association is only formed as funds have not been raised. Rob Partners is a management consulting firm established with a capital of 1 million KRW. The disclosure mistakenly records the name as Robo Partners.

THE E&M acquired 1,663,536 shares (13.42%) from Vessel's previous largest shareholder on the 6th for 13.7 billion KRW, becoming the new largest shareholder. Along with this, THE E&M planned to inject new funds into Vessel through a 20 billion KRW capital increase and CB investment.

However, it is analyzed that the funding is facing difficulties. As of the end of the third quarter last year, THE E&M held 18 billion KRW in cash equivalents. From this, 9 billion KRW was used for the acquisition of Vessel's old shares. Of the total 13.7 billion KRW acquisition amount, 4.7 billion KRW was raised through stock-secured loans.

Excluding operating funds, to raise the additional 20 billion KRW to be invested in Vessel, external funding or surplus cash flow generated from internal operations is required.

However, THE E&M itself returned to a deficit last year. THE E&M announced on the 13th that it recorded an operating loss of 2.3 billion KRW last year, turning to a deficit. During the same period, sales decreased by 13.5% to 46.6 billion KRW, and net loss widened by 47.5% to 17.8 billion KRW. THE E&M operates a business running one-person media personal broadcasting platforms such as ‘PopcornTV’.

THE E&M stated, “Operating losses occurred due to decreased sales caused by intensified competition in the media platform market, increased investment costs related to establishing information security systems, and increased advisory fees due to entry into new businesses.” They added, “The net loss reflects impairment losses on investment securities of subsidiaries and intangible assets such as goodwill.”

In this situation of expanding losses, THE E&M itself recently failed to attract external funding. THE E&M announced on the 27th of last month that it canceled a 2.2 billion KRW third-party allotment capital increase. This capital increase had been pursued targeting CEO Shin Hwanryul since August 2021, but was ultimately withdrawn after about one year and five months. A THE E&M official said, “From a fund management perspective, the capital increase and CB payment were postponed, and we plan to complete the payment by the end of March through attracting external investors.”

This content was produced with the assistance of AI translation services.