Korean game firm under fire of lackluster investment despite cash hoard of $6 bn

2022.05.11 13:24:43 | 2022.05.11 14:49:55

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South Korean game publishers have stacked up cash hoard of 7.3 trillion won ($5.7 billion) while their stocks lost half of their value due to deterioration of business performance, further upsetting investors for their lacking endeavors to indulge shareholders or seeking new growth.

The combined market capitalization of 30 listed game companies came to 48 trillion won on May 10, nearly halved from 83 trillion won on December 31, 2021. Some game stocks are performing below one-third of their 52-week highs.

Correction in game stocks had been predicted.

The stocks flew high during the pandemic period of high reliance on home entertainment and on frenzy over blockchain assets like non-fungible token (NFT). The hype has fizzled out in line with global return to normalcy.

A rebound in the game stocks has been projected in the second half upon release of new labels, but it won’t likely be enough to indulge investors.

Thanks to pandemic heyday, game companies’ cash reserves hit a record high of 7.3 trillion won as of the end of 2021, up 2.6 times in three years.

Cash and cashable assets held by Krafton, the largest Korean game company based on market cap, surged to 3 trillion won in 2021 from 146.7 billion won in 2019. Kakao Games, which made a blockbuster market debut in 2020 and enjoyed successful launch of new game “Odin: Valhalla Rising,” has seen cash reserves quadrupled to over 800 billion won. NCSoft’s cash and cashable assets expanded to 255.9 billion won from 150 billion won in 2020. Wemade and Com2uS, the two pioneers in incorporating digital assets to games, saw their cash reserves balloon to 273.7 billion won and 253.7 billion won, each, by the end of last year, from modest 30 billion in 2019.

Netmarble is the only game major that saw a fall in cash reserve over the same period. It shrank about 10 percent to 1.35 trillion won.

Shareholders at the recent general meetings demanded game companies to increase dividend payouts if they were to simply keep cash piled up instead of making investments.

Game firms claim they are on the lookout for M&A targets and investments.

Krafton had pledged to spend 70 percent of its IPO proceeds of over 4 trillion won raised in August last year to acquire new intellectual properties.

Netmarble and NCSoft are also expected to invest aggressively on new games and developers.

By Jin Young-tae and Cho Jeehyun

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