'All 38,000 investors in the red': Kakao Games shareholders rage as share price falls 90% from peak

Visitors crowd the Kakao Games booth at G-Star, a gaming festival held in November 2022. [Kakao Games]

"Among approximately 38,000 investors, the proportion in the red is 100 percent." — Kakao Games Shareholder Alliance

"I held on for five years, and there's nothing left to do." — Kakao Games shareholder

The Kakao Games Shareholder Alliance has issued a statement holding the company accountable for its prolonged share price decline, as frustrated investors stepped forward to demand action.

Kakao Games shares traded above 100,000 won five years ago but closed Monday at 10,040 won — a collapse of roughly 90 percent, or about one-tenth of the peak price.

With Line Yahoo now installed as Kakao Games' largest shareholder and a structural overhaul underway, the industry is watching closely to see whether the share price can recover anytime soon.

According to IT industry sources, the Kakao Games Shareholder Alliance released a statement Monday immediately after the company's extraordinary general meeting. Kakao Games held the meeting and a subsequent board meeting that morning, passing a resolution to appoint Kim Tae-hwan and Lee Si-woo as co-chief executives. The moves follow Line Yahoo's recent emergence as the company's largest shareholder.

Kakao Games co-CEOs Lee Si-woo (right) and Kim Tae-hwan. [Kakao Games]

At the meeting, the shareholder alliance said Kakao Games' share price "has fallen continuously over the past five years, dropping more than 90 percent from its peak," adding that the average return for investors tracked through Kakao Pay Securities stands at roughly minus 70 percent. The group urged the company to treat the change in controlling shareholder "not merely as a shift in management, but as the starting point for restoring shareholder value."

The alliance also laid out four demands: disclosure of a substantive shareholder return policy, establishment of an official communication channel with the shareholder alliance, a transparent explanation of short selling and stock lending activity, and public disclosure of release schedules and revenue outlooks for key new titles.

With ownership of Kakao Games having changed hands, the industry is also focused on what the shift means for the share price going forward. The company recently completed the stake transfer that brought Line Yahoo in as its largest shareholder.

According to regulatory filings, Japan's Line Yahoo acquired a 33.43 percent stake in Kakao Games on June 19 through a special-purpose vehicle, LAAA Investment, becoming the largest shareholder. Kakao was pushed to second place with a 14.68 percent stake. Line Yahoo has thereby secured management control of Kakao Games.

Also notable is the substantial financial firepower Kakao Games gained through the ownership change. The transaction injected a total of 300 billion won into the company — comprising 240 billion won from a rights offering and 60 billion won from convertible bonds.

The Kakao Games headquarters building. [Kakao Games]

Kakao Games says it intends to pursue expansion on the strength of the newly secured funds. Newly appointed co-CEO Kim is regarded in the industry as a mergers and acquisitions specialist with a background at Nexon, where he led multiple deals and oversaw post-merger integration.

However, Kim drew a line on speculation about a merger with Line Games, which has drawn considerable industry attention, saying "nothing has been decided at this point." The company plans to build a cooperative relationship with Line Games rather than pursue a merger, aiming to generate business synergies.

New Chief Financial Officer Shin Kwon-ho said at the meeting that "a strong partnership between the two companies will be built around Kakao Games, which is larger and has a longer history," adding that the company plans to "use the Line platform, which has strong reach in Southeast Asia, to target additional markets in a manner similar to Kakao Games' past success formula."

chami@heraldcorp.com