As Rapport Labs moves to acquire home shopping corporations SK Store, venture capital firms (VCs) are showing interest. Rapport Labs, the operator of the 4050 women's fashion platform "Queenit," was selected as the preferred bidder to acquire home shopping corporations SK Store. VCs see the structural combination of the mobile platform Queenit and SK Store, which has TV distribution channels, as advantageous for product sales and customer acquisition.
However, inside SK Store, some say that if a company that has maintained profitability is sold to a loss-making Start - Up, financial risks could grow.
According to the venture industry on the 1st, Rapport Labs is negotiating acquisition terms with SK Telecom and SK Store based on 40 billion won in committed investment from Altos Ventures and 60 billion won in cash and cash equivalents on hand. Multiple VCs are also said to be indicating investment interest of about 50 billion won. Rapport Labs says there will be no difficulty financing the estimated 100 billion won acquisition price.
VCs are focusing on the relationship between Rapport Labs and SK Store. Small and midsize sellers account for 95% of Queenit. As a data home shopping (T-commerce) operator, SK Store is also obligated to allocate 70% to small and midsize corporations. With Queenit and home shopping channel customers being similar, and with the ability to handle products from small sellers on both TV and mobile, they see strong synergy in terms of product expansion and inventory handling.
Improved cash flow is another reason for growing VC interest. Rapport Labs' cash flow rating is CF3, in the upper-mid range. The cash flow rating has six levels, from CF1 (best) to CF6 (very vulnerable).
Rapport Labs posted operating losses of 7.4 billion to 16.4 billion won each year from 2021 to last year, and its 2023 operating result was also a 7.5 billion won loss, but operating cash flow rebounded to 5.7 billion won last year. Last year's revenue was 57 billion won, up 38% from 2023, which was also seen as a strength in terms of scale.
Inside SK Store, as the sale becomes more concrete, concern is growing over potential risks. SK Store is the No. 1 T-commerce player, posting 302.3 billion won in revenue and a 7.3 billion won profit last year. The view is that a sale to loss-making Rapport Labs would put both partners and consumers at risk.
The SK Store labor union is opposing the sale, citing the "Jeongyukgak–Chrocmaeul" case. In 2022, the Foodtech Start - Up Jeongyukgak acquired Chrocmaeul, an organic food distributor that had fallen into the red. Of the 90 billion won acquisition price, 37 billion won relied on external borrowing such as short-term bridge loans. Afterward, it suffered accumulated losses and a cash crunch, and in Jul. this year it filed for corporate rehabilitation.
On the 26th of last month, the union held a rally in front of SK Telecom headquarters opposing the sale, saying, "We remember clearly what destruction reckless expansion by loss-making corporations brings and how many small business owners shed tears of blood." It added, "Rapport Labs does not have a solid financial base," and "Reckless expansion by loss-making corporations, as in the past 'Jeongyukgak–Chrocmaeul case,' can cause significant harm to the market."
VCs view this acquisition as different in nature from "Jeongyukgak–Chrocmaeul." When Jeongyukgak acquired Chrocmaeul, Chrocmaeul's operating losses were growing, but SK Store recorded 7 billion won in operating profit last year, showing a difference in the financial soundness of the target corporations.
In particular, Jeongyukgak's monthly active users (MAU), which were about 300,000 in Mar. 2022, plunged to 127,000 eight months later. By contrast, Queenit's MAU stood at 2.7 million as of Sep. this year, which VCs see as steady demand.
An industry official said, "Jeongyukgak, an online fresh food Start - Up, took on an offline distribution network, increasing inventory and logistics burdens, whereas Rapport Labs is adding a broadcast sales channel, so the structure is different."
A Rapport Labs representative said of the acquisition, "We will develop it into a commerce platform that connects the 4050 customer base and small brands."