Musinsa is pursuing an IPO targeting a 10 trillion won corporate valuation, but Redeemable Convertible Preferred Shares (RCPS) issued during past fundraising rounds are pressuring net income and financial structure. In 2024, the company recorded operating profit of 140.5 billion won but net profit of only 7.7 billion won, with RCPS-related financial costs totaling 129.5 billion won. The company classified 824.3 billion won in RCPS-related liabilities as current liabilities, including 494.5 billion won contractually due within one year. The financial burden stems from growth capital raised through RCPS issuance, now creating challenges for IPO valuation as accounting policies classify conversion rights as derivative liabilities rather than equity.
Musinsa Records 140.5 Billion Won Operating Profit Offset by 129.5 Billion Won RCPS Costs
Musinsa's 2024 consolidated revenue reached 1,467.9 billion won, an 18.1% increase from the previous year, with operating profit rising 36.6% to 140.5 billion won. The company turned profitable in 2024 after recording an 8.6 billion won operating loss in 2023. However, financial costs totaled 144.6 billion won, exceeding operating profit, resulting in net income of only 7.7 billion won. On a standalone basis, the company recorded operating profit of 145.8 billion won but posted a net loss of 10.6 billion won.
RCPS-related costs comprised 129.5 billion won of total financial expenses, including 87 billion won in interest amortization on RCPS debt and 42.5 billion won in conversion right derivative valuation losses. Despite generating over 140 billion won in operating profit, RCPS-related expenses substantially offset net income.
Accounting Policy Change Reclassifies 509.3 Billion Won from Equity to Liabilities
Musinsa changed its RCPS accounting policy in 2024. Previously, conversion right consideration was classified as equity, but the company adopted Korean Accounting Standard 1032, recognizing it as derivative liabilities measured at fair value. The policy change was applied retrospectively to comparative prior-year financial statements.
As of December 31, 2024, consolidated total equity decreased from 770.4 billion won (before change) to 261 billion won, a reduction of 509.3 billion won. No cash outflow occurred, but conversion right consideration and related items were reclassified from equity to liabilities, significantly altering balance sheet presentation.
As of December 31, 2025, Musinsa's current RCPS liabilities totaled 688.6 billion won, with current derivative liabilities of 135.7 billion won. Combined RCPS-related liabilities reached 824.3 billion won, all classified as current liabilities. The company stated: "As of 2025, the company does not unconditionally hold the right to defer early redemption claim exercise for more than 12 months, therefore classified as current liabilities." This means Musinsa cannot unilaterally postpone redemption for over one year if investors exercise early redemption rights.
RCPS Contract Terms Require 494.5 Billion Won Classification as Due Within One Year
Current liability classification does not mean 824.3 billion won in cash will immediately exit. Musinsa stated in its business report that all RCPS entries under "scheduled for redemption within one year" were marked "not applicable." The company explained: "As of the reporting date, there are no actual redemption requests from investors in progress or redemptions scheduled within one year."
However, contractual obligations remain. In financial liability maturity analysis, Musinsa allocated 494.5 billion won of the 824.3 billion won RCPS book value to the under-one-year bracket, with the remaining 329.8 billion won in the after-two-years bracket. The maturity analysis uses contractual early redemption dates as maturity and reflects the earliest period when payment could be demanded. While no actual redemption requests exist, contractually nearly 500 billion won could be claimed within one year.
Series 1 RCPS entered its redemption period in December 2024, Series 2 in March, and Series 2-1 and 2-2 RCPS redemption periods begin in August. Redemption amounts apply 8% annual interest from issuance date, with Series 3 issued in 2023 carrying 10% annual terms.
As of December 31, 2025, Musinsa held 571.8 billion won in cash and cash equivalents on a consolidated basis. However, standalone cash and cash equivalents for Musinsa (the RCPS issuing entity) totaled 121.5 billion won. Standalone debt-to-equity ratio rose from 658.86% at end-2024 to 788.28% at end-2025.
FAQ
What is Musinsa's net profit compared to operating profit in 2024?
Musinsa recorded operating profit of 140.5 billion won in 2024, but net profit was only 7.7 billion won due to 144.6 billion won in financial costs, of which 129.5 billion won was RCPS-related expenses including interest amortization and derivative valuation losses.
Why did Musinsa classify 824.3 billion won in RCPS liabilities as current?
Musinsa classified all RCPS-related liabilities as current because the company does not unconditionally hold the right to defer early redemption claim exercise for more than 12 months, meaning investors could exercise redemption rights within one year under contract terms, though no actual redemption requests have been filed.
How much RCPS liability is contractually due within one year?
In financial liability maturity analysis, Musinsa allocated 494.5 billion won of RCPS-related liabilities to the under-one-year bracket based on contractual early redemption dates, representing the earliest period when payment could be demanded under contract terms.
