The Korea Small Business and Startup Agency's under public home shopping has confirmed that it will distribute its first-ever dividends amounting to approximately 3 billion won. The dividends are reported to be paid out in the first quarter of this year.
Public home shopping, which faced severe penalties from the Ministry of SMEs and Startups last year for selling 'milk cow beef' as grade A Korean beef, is expected to cause controversy as it distributes a dividend amount equivalent to its 2023 operating profit (3.1 billion won) amid the absence of its CEO. It is also in a situation where a deficit transition is likely in 2024.
According to coverage from CHOSUNBIZ on the 15th, public home shopping has recently finalized discussions to distribute dividends amounting to 2.8 billion won.
Currently, the largest shareholder of public home shopping is the Korea Small Business and Startup Agency (formerly known as the Small and Medium Enterprise Distribution Center), holding 50% of the equity, followed by NongHyup (45%) and the National Federation of Fisheries Cooperatives (5%). They are expected to receive dividends based on their respective equity proportions.
According to commercial law, stock companies can distribute dividends to shareholders; however, public home shopping is a public institution established in 2015 for public interest purposes. This is to support the distribution channels for small and medium-sized enterprise products and local agricultural, livestock, and fishery products.
At the time it received approval for its broadcasting channel usage business from the Ministry of Science and ICT in April 2015, there was a condition stating, 'It is prohibited to distribute the corporation's profits to shareholders.'
During the re-approval process in 2018, a condition was placed that stated, 'No dividends shall be distributed until all losses are completely resolved.'
It is known that the demand for dividends, led by the Korea Small Business and Startup Agency, began in February 2023. Public home shopping, which had continued to operate at a loss since its founding, recorded a surplus of over 20 billion won for the first time since the 'COVID-19 special' started in 2020, improving its financial condition.
Public home shopping was designated as the only public sales channel for masks during the 'mask crisis.' This allowed it to significantly increase the number of members and raise its profile.
However, at that time, since the losses had not been resolved, dividends could not be distributed according to the Ministry of Science and ICT's approval conditions.
In April 2023, public home shopping received re-approval under the somewhat relaxed condition of 'prohibition of dividends if there are losses' and established grounds for dividends through amendments to its articles of incorporation in December 2023.
As the profit trend of public home shopping continues, it is reported that the retained earnings as of 2023 have reached around 16 billion won, prompting the Korea Small Business and Startup Agency to propose dividends again around February or March 2024. Meeting the grounds for dividends, public home shopping has recently decided to distribute its first-ever dividends of 2.8 billion won following discussions among shareholders.
Industry insiders have pointed out that this could be a case of 'eating into one's own flesh.'
In the context of heightened competition in the retail industry and a downturn in the home shopping market, public home shopping is projected to transition into a deficit in 2024. If profits are quickly distributed as dividends, it not only reduces new investment resources but also inevitably diminishes the benefits that could go to partner small and medium-sized enterprises and small business owners.
If it returns to a deficit trend again, there is even a possibility that the current commission rate, which is at the industry's lowest level of around 20%, could rise. There are concerns that this premature dividend banquet might pass the burden onto customers.
As a shareholder, it may seem to benefit from dividend revenues in the short term, but if public home shopping's business contracts, revenues could decrease.
They act as agents for product supply through public home shopping and receive commissions. In the case of the Korea Small Business and Startup Agency, it currently supplies about 10% of the total handling amount of public home shopping, with programming time exceeding 10%.
A public home shopping official noted, 'Thanks to the continued efforts with our shareholder companies since the early days of our establishment, we managed to overcome the deficit situation,' and 'We decided to distribute dividends at the request of our shareholders.'
Some point to the 'fake sesame oil' incident as a backdrop for the Korea Small Business and Startup Agency's demand for a one-time dividend from public home shopping.
Through the Korea Small Business and Startup Agency, public home shopping sold 2.4 billion won worth of domestic sesame oil from a company located in Chungju, North Chungcheong Province, since 2020. However, it was later discovered that the company had misled consumers by selling sesame oil made from seeds imported from China and India as domestic products.
Public home shopping had to refund consumers for this incident and is reported to have received the full amount from the Korea Small Business and Startup Agency at the end of last year by exercising its right of recourse.
An industry insider stated, 'Unless there is a special situation like COVID-19, it seems that the home shopping industry is continuing toward stagnation, so the Korea Small Business and Startup Agency likely believes that this year is its only chance to collect any costs from the sesame oil incident.'
The Korea Small Business and Startup Agency has stated that there is no connection between the fake sesame oil incident and the shareholder dividends. They also mentioned, 'This dividend is due to the increase in profits resulting from resolving public home shopping's losses and the increased interest expense burden from the investment for establishing public home shopping,' adding, 'This dividend is for the profits generated in 2023, and there has been no review of dividend requests for 2024.'