Fall of Venture Myth

 

Pantech is under court receivership after suffering from serious financial difficulties due to an inability to succeed in the smartphone market.

Pantech announced at a board meeting held in the morning of August 12 that they decided to go under legal management in order to reorganize the company and stabilize management, and filed for court receivership at Seoul Central District Court.

As Pantech filed for receivership, the Court will decide whether or not to accept the request after assessing the corporate value of Pantech. According to the due diligence of its creditors, the going concern value of Pantech is higher than the liquidation value, which means that the court will probably accept the receivership request.

Once the receivership is confirmed, the Court will determine a legal administrator for Pantech. Since this situation has not been caused by the failings of corporate executives, the current management executives, including CEO Lee Joon-woo, are likely to be appointed as legal administrators.

Afterwards, Pantech, under the control of its legal administrators, needs to submit plans for corporate rehabilitation to the court within two months, which is contingent upon the court’s approval.

Once the court receivership is effective, all commercial credits are exempted, which will seriously hurt the subcontractors of Pantech that already supplied components but have not yet received payments. There are 550 subcontractors of Pantech, and the majority of them are small businesses which could be forced to go bankrupt in turn.

Pantech was established in 1991 by former Vice Chairman Park Byung-yeop, who used to work as a salesman at Maxon Korea, with six employees and 40 million won (US$38,926) in capital. Pantech acquired Hyundai Curitel and SK Teletech afterwards, and its success has been called the “legend of a salary man.” However, Pantech went through a first workout due to financial difficulties from 2007 to 2011, and the second workout after March this year.

As Pantech will be under legal management, the triangular competition structure with Samsung and LG in the smartphone manufacturing industry will inevitably change. Especially if Pantech, which possess highly-advanced technologies, is sold to a Chinese or Indian company, critical technologies could be leaked.

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