Kakao Games injects $173mn into S.Korean game company

Kakao Games Corp. has injected around 190 billion won ($173 million) into South Korean game company Neptune Corp., pouring in nearly half the proceeds from its initial public offering this year.

Kakao Games, which previously held around 2.4 million shares or a 10.08% stake in the company, will become Neptune’s largest shareholder with a 31.66% stake.

Neptune said on Dec. 18 that it will carry out a paid-in capital increase in which Kakao Games will commit 193.5 billion won in cash to acquire around 7.5 million common shares in the company. The announcement was made before the stock market opened.

Neptune, listed on the country's tech-heavy bourse Kosdaq, saw heavy fluctuation in its share price following the announcement. Shares plunged by 9.85% after the market opened and then surged by 8.51% to 32,500 won ($30). The company’s share price eventually closed at 29,900 won, down 0.17%.

Market watchers are speculating that the share price turbulence could be due to the possibility that news of Kakao Games’ investment was leaked in advance, noting that Neptune’s share price rose considerably before the announcement. 

Neptune’s share price jumped by 31% over the three days before Friday's announcement. On Thursday alone, the company's share price soared by 17.45%.

In the past month, the company's share price almost tripled, reaching an intraday high of 43,200 won on Dec. 4. Foreign investors led the heavy buying during this period as they scooped up net of 5.7 billion won since Nov. 23 and realized profit after Kakao Games' investment was announced.

Market watchers say Kakao Games’ handsome investment is promising as the game arm of Kakao Corp. could secure intellectual property rights for global games. Since making its trading debut, Kakao Games has dealt with criticism of being overvalued given that it has a low portion of directly developed games.

Aware of criticism, Kakao Games’ Chief Executive Namkoong Whon said that the company would use its IPO funds to invest in game companies to secure directly developed games in addition to M&A activities.

Neptune rolled out its latest title Eternal Return: Black Survival on the world’s largest game platform Steam in October. Since its launch, the game has pulled in around 50,000 players, making it the second Korean game to enjoy great success since Krafton Inc. rolled out its global blockbuster PlayerUnknown's Battlegrounds (PUBG) in 2017. 

Kakao Games' investment is inarguably favorable for the company, which has been in dire need of funding to develop and release new games. Earlier in April, Neptune sold off its 1% stake in Krafton – preparing to make a trading debut next year – for 46.4 billion won.


Write to Bum-jin Chun at forward@hankyung.com
Danbee Lee edited this article.