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[Alpha Biz=(Chicago) Reporter Kim Jisun] SK Square will hold a board meeting on the 29th to deal with the fate of 11th Street. If the board of directors finalizes not to exercise the right to purchase stocks (call options) guaranteed to financial investors (FIs), 11th Street will virtually be forced to sell.
According to the investment banking industry, SK Square will hold a board meeting on the same day to discuss whether to exercise a call option for its 18.18% stake in 11th Street held by FIs. As the call option expires on the 4th of next month, they are reportedly agreeing to reach a conclusion on the same day as possible.
In 2018, SK Square invested a total of 500 billion won, including △ 350 billion won of △ national pension fund △ blind fund of H & Q, an operator of private equity fund (PEF). The condition is to complete the initial public offering (IPO) by the end of September, and if it fails, included a call option clause that allows SK Square to buy back its stake in FI with 3.5 percent annual interest on the principal. If it gives up, FI has added an drag along that can sell its stake in SK Square, a major shareholder, to a third party.
If the board of directors decides to exercise its call option, SK Square will have to return a total of 550 billion won, including interest, to FI. As of the end of June this year, SK Square's cash and cashable assets amounted to 912.6 billion won, which is not affordable. However, there is strong skepticism among executives about buying a hundreds of billions of won stake in the company, which has long been running ups and downs.
11th Street was recognized for its corporate value of 2.75 trillion won when it attracted investment in 2018, but it broke down because it failed to win more than 1 trillion won in recent negotiations with e-commerce company Cuten. Analysts predict that there will be no buyer to buy 11th Street at a high price, which has already failed to sell it once due to its poor performance. Even if the buyer appears and 11th Street is sold, SK Square must return the sale price to FI first according to the terms of the contract. The lower the price, the less funds SK Square will have.
In this case, 11th Street's financial difficulties are expected to become more serious. Currently, 11th Street is carrying out its first voluntary retirement since its establishment in 2007. 11th Street, which posted a cumulative operating loss of 151.5 billion won last year, posted a cumulative operating loss of 91 billion won in the first to third quarters of this year.
AlphaBIZ 김지선(stockmk2020@alphabiz.co.kr)
