Netmarble hits jackpot with stake investment in NCSoft, Big Hit Entertainment

2020.07.16 09:43:44

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South Korea’s leading game developer Netmarble Corp. has emerged as a hot stock among investors after shares of NCSoft Corp. and Big Hit Entertainment Co. that it partly owned have been on a roll thanks to their solid business performance even during the COVID-19 crisis.

According to brokerage industry on Wednesday, the value of NCSoft shares owned by Netmarble reached 1.8 trillion won ($1.5 billion) based on Wednesday closing price.

Netmarble acquired NCSoft’s treasury shares in February 2015 in a gesture of support for NCSoft that was in a management feud with its largest shareholder Nexon. Netmarble bought a total 1.95 million shares of NCSoft – giving 8.9 percent ownership – for 390 billion won.

NCSoft shares were 200,000 won apiece when Netmarble purchased them but since then, the stock price has quadrupled to 930,000 won. Netmarble’s investment yield rate in NCSoft shares stands at 371.8 percent.

Although NCSoft was a late runner in the mobile game market, it has made huge success with Lineage M and Lineage 2M games based on strong intellectual property ownership. It also has emerged as one of valuable stocks at a time of the pandemic that has forced people to stay home. Along with e-commerce and online learning and work-from-home solution providers, game companies have enjoyed growth during the COVID-19 lockdown. This year alone, NCSoft shares have surged over 70 percent.

Netmarble’s equity gain is expected to grow even higher as Big Hit Entertainment, the maker behind boyband BTS, is readying to debut on Korea’s main Kospi market later this year.

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Netmarble is the second-largest shareholder of Big Hit Entertainment with 450,000 shares, equivalent to 25 percent ownership. The game developer invested 201.4 billion won to own the shares after evaluating the entertainment company’s enterprise value at about 800 billion won.

The brokerage industry estimated the current value of Big Hit Entertainment to reach at least 2 trillion won and up to 5 trillion won. The value of Big Hit Entertainment equity owned by Netmarble is projected to be worth at least 500 billion won and up to 1.3 trillion won.

Netmarble also owns 5.6 percent stakes in Kakao Games and 3.9 percent in Kakao Bank. Kakao Games is also preparing for IPO later this year, and Kakao Bank is expected to begin preparation for listing. The brokerage industry projects the equity value of Kakao Games and Kakao Bank to be minimum 300 billion won in total.

Thanks to the successful stake investments, Netmarble shares have been rallying. This month alone, its shares jumped 26 percent, outperforming the main Kospi’s 4.5 percent gain.

Shares of Netmarble closed 6.3 percent lower at 126,500 won on Wednesday after nine days of rally.

By Pulse

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