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Saudi crown prince to be top shareholder of Seoul-listed gaming firm

Nov 27, 2020 (Gmt+09:00)

SNK Corp.'s King of Fighters 

The Crown Prince of Saudi Arabia Mohammed bin Salman has agreed to buy 240 billion won ($217 million) worth of shares in the South Korea-listed game company famous for King of Fighters, to become its top shareholder.

The deal, signed on Nov. 26., marked the Saudi royal family’s first investment in a game company listed on the Seoul bourse. It is part the kingdom's efforts to invest in high-growth areas and intellectual property for the younger generation, according to a statement from the crown prince’s flagship charity foundation, MiSK Charity.

Under the agreement, Prince Mohammed will acquire a 33.3% stake in SNK Corp. from its two biggest Chinese shareholders by Jan. 12, 2021, both companies said.

“We will increase our shareholding in SNK to 51%," MiSK Charity said in the statement. “This investment in Japan-based SNK is part of our institution’s strategy to help improve our young generation’s capability through our investment.”

SNK, based in Osaka, Japan, was acquired by the Chinese firm Zuikaku Co, in 2015 and then went public on South Korea’s junior Kosdaq market in May 2019.

The purchase was made through Electronic Gaming Development Co. (EGDC), wholly owned by MiSK Charity.

After the share deal announcement, SNK shot up by its daily limit of 30% to close at 16,500 won on Friday. But that is still down 59% from its IPO price of 40,400 won.


MiSK Charity said the stake purchase underscored the foundation’s ongoing efforts to build economic partnerships in a range of areas and with various international bodies to help its younger generation develop technology and nurture talent.

Last year, the foundation and SNK introduced an eight-week training program for Saudi Arabians to study electronic game development, animation and 3D graphics at SNK’s headquarters in Osaka.

The charity foundation has also introduced training programs together with global companies to woo its younger population.

Founded in 1973, SNK had been a global sensation with hits such as King of Fighters, Metal Slug and Samurai Showdown until gaming PCs and consoles displaced arcade machines from the mid-1990s. SNK went into default in 2001.

The current entity of SNK was a spun-off operation of gaming and intellectual property from the former entity of SNK.

In 2017, SNK’s attempted to list in Seoul, hoping to ride on the market hype over the gaming industry. In that year, the country’s two game developers -- Netmarble Corp. and Pearl Abyss Co. – were valued at 13 trillion won and 1 trillion won on their trading debuts on Kospi and Kosdaq, respectively, beating market expectations.

At the time SNK estimated its enterprise value at slightly above 1 trillion won, about three times its current market value. It had to withdraw the IPO plan in 2018 due to cooled market interest in the gaming industry.

HEFTY DIVIDENDS, STOCK OPTIONS

Since its stock market listing last year, its share price has been in a downward spiral. In particular, the company’s decision in June this year to pay 68.4 billion won in dividends took a heavy toll on the stock. The dividend payments ending in July of this year outweighed its full-year operating profit of 51.3 billion won for 2019.

Further, the announcement of granting stock options in August to its 31 employees, at an exercise price of just 1 won apiece, pummeled the company shares. The stock options represent 2.5% of its outstanding shares and would produce a return of 16,499%, based on the current market price. Although they have not yet been exercised, they remain an overhang.

The share purchase by the Saudi’s crown prince is unlikely to give a short-term boost to SNK's earnings, a game industry analyst said.

“SNK is no more a game developer nor a game publisher,” the analyst said, asking for anonymity. “Based on its current business model of making money from selling intellectual property on games, it will find it difficult to release new games due to lack of developers and experience.”

SNK’s operating profit tumbled by 43.2% year on year to 26.4 billion won in the year ending in July this year, with sales down 13.2% to 88.5 billion won.

Write to Bum-Jin Chun at forward@hankyung.com

Yeonhee Kim edited this article.

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