DoubleU Games CI.

This article was published on Jan. 13, 2025, at 4:16 p.m. on the CHOSUNBIZ MoneyMove site.

Domestic private equity fund (PEF) management firm Stick Investment is in the process of selling its stake in DoubleU Games' subsidiary DoubleDown Interactive (DDI). Previously, Stick Investment converted its common shares of DDI, held domestically, into American depositary receipts (DR). Given DDI's high market share in North America, the shares are being sold in the U.S. rather than domestically.

On the 13th, according to investment banking (IB) industry sources, Stick Investment selected B. Riley Securities as the lead underwriter and began the sale of its DDI stake. It has already sold 650,873 American depositary receipts (ADR) for about 10.4 billion won, with plans to continue selling 297,640 ADRs until March. Stick noted that it is concerned about potential overhang and is gradually dividing and selling the equity, with sales expected to continue until the end of the year.

Previously, DoubleDown Interactive issued 10,013,620 American depositary receipts (ADR) based on the total common shares (500,681 shares) held by Stick Investment's special purpose corporation (SPC) Stick Special Situation Diamond Co. The ratio of common shares to ADR is 1 to 20. Based on the last trading day's ADR closing price of $10.46 for DoubleDown Interactive, which is listed on the Nasdaq, the value of the remaining equity stands at approximately $97.93 million (about 144 billion won).

DR represents securities that domestic companies issue to be listed on overseas stock markets. Rather than issuing new shares, previously issued common shares are held by the Korea Securities Depository, which in turn allows foreign depositary institutions (such as global banks) to issue DRs that can be exchanged for common shares. Once DRs are listed on foreign stock markets, it can create an opportunity for foreign investors to trade domestic companies' shares. If issued in the U.S. market, it is referred to as an American Depositary Receipt (ADR).

DoubleDown Interactive was acquired by DoubleU Games, a KOSPI-listed company, in 2017 for approximately 900 billion won. At the time, Stick Investment participated in the deal as a financial investor (FI) by acquiring 300 billion won worth of warrants and convertible bonds. Specifically, Stick Investment invested 150 billion won through the first Special Situation Fund (SSF) it established, while the remaining 150 billion won was raised through loans from financial firms.

Later, as DoubleU Games exercised a call option ahead of DoubleDown Interactive's ADR Nasdaq listing, Stick Investment sold its holdings in the warrants, and the convertible bond amounts were converted into common shares by exercising their conversion rights. When DoubleDown Interactive listed its ADR on the Nasdaq in August 2021 and sold part of it, Stick Investment's stake decreased to 20.20%.

Stick Investment is nearing the liquidation of its first SS fund, with the recent completion of the equity sale of HANCOM LIFECARE, having last sold its stake in DoubleDown Interactive. The first SS fund had previously invested about 102 billion won in Big Hit Entertainment (now HYBE), the agency behind BTS, and recovered 941.6 billion won over two years and seven months. Additionally, it was successful in recovering investment funds from CJ Healthcare (now HK inno.N) and the Hanwha Systems new corporation for the systems integration business.

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