Nature Republic IPO faces delay on CEO risk
By Lee Hyo-sik
Nature Republic CEO Jung Woon-ho
Nature Republic, one of Korea’s low-cost cosmetics brands, is facing increasing difficulties listing its shares on the local bourse because its founder and CEO has repeatedly run into trouble with the law.
The company initially planned to go public last year but wasn’t able to do so because CEO Jung Woon-ho was put behind bars on charges of violating the Foreign Exchange Control Act after gambling overseas. Jung reportedly lost more than 10 billion won ($8.7 million) at casinos in Macao and the Philippines from March 2012 and October 2014.
This month, his lawyer set out to sue him for physically assaulting her when the two met at Seoul Detention Center during an argument over her fees. The 51-year-old Jung has also been accused of hiring a legal broker to lobby judges and prosecutors in a bid to receive a lenient sentence.
He is now serving an eight-month sentence and is due to be released in June unless he is charged with additional crimes. Jung was sentenced to a one-year prison last October, but the appeals court reduced this term to eight months earlier this month.
“Nature Republic has planned to jumpstart its initial public offering (IPO) to float its shares this year after the CEO is released in June. But Jung’s additional troubles with the law have adversely affected the firm’s plan to do so,” said an equity analyst at a Seoul-based securities firm, on condition of anonymity.
“I don’t think the company will be able to go public any time soon because the Korea Exchange and financial regulators view corporate risks associated with CEOs very seriously when they examine IPO applicants,” the analyst said.
Nature Republic said its IPO plan has been delayed, adding that it is currently pondering when it would be the right timing to pursue this.
The company said in 2015, that sluggish consumer spending in the aftermath of the outbreak of Middle East Respiratory Syndrome and China’s strengthened rules against imported cosmetics products made it difficult to list shares on the local bourse.
In November 2014, Nature Republic selected Daishin Securities as its IPO manager and had planned to go public in 2015. It had sought to use the money raised from the IPO to expand its overseas ventures.
The company earned 280 billion won in sales in 2015, running some 700 stores in Korea and 120 stores in 14 foreign countries. Jung founded Nature Republic in 2009 after selling The Face Shop to LG Household and Health Care.