Jang Hyun-guk, former CEO of Wemade, has effectively acquired Action Square (Nexters) and revised the articles of incorporation to eliminate restrictions related to the subscription rights of new shares and increase the issuance limit of convertible bonds and bonds with subscription rights. This is analyzed as a tactic aimed at attracting future investments. The amendment of the articles of incorporation provides grounds for issuing additional shares, which could potentially exert pressure on the stock price.
Action Square held an extraordinary shareholders' meeting on the 7th and changed part of its articles of incorporation. A look at the amended articles reveals that the provision regarding subscription rights has been completely removed, which stated, "not exceeding 50% of the total number of issued shares."
The amended articles allow for the issuance of new shares without restriction in cases such as ▲issuing new shares through a public offering ▲issuing new shares for foreign investment ▲issuing new shares to domestic and foreign financial institutions or institutional investors ▲necessary for achieving the company’s operational objectives such as adopting new technologies or improving financial structure.
Action Square has also expanded the issuance limits for convertible bonds (CB) and bonds with subscription rights (BW). The previous articles stipulated that CB and BW could be issued "within the limit of 800 billion won in total face value of bonds," but this has been corrected to "within the limit of 2 trillion won in total face value of bonds." The allowable total face value of bonds has increased by about 150%.
With the ability to issue subscription rights in large quantities and the increased issuance limits for CB and BW, there are concerns that large-scale bonds could be issued in the future. If CB or BW are issued, they remain as liabilities for a certain period, which could increase the liability ratio. If CB and BW are converted later, there is a greater possibility that new shares will be issued, leading to a dilution effect that reduces the equity ratio of existing shareholders.
However, the impact is not solely negative. If subscription rights are issued without restriction, it can present more attractive conditions to investors, making strategic investment attraction easier. Additionally, if the issuance limits for CB and BW increase, these could serve as an alternative to paid-in capital increases.
In the case of paid-in capital increases, new shares are issued immediately, diluting the stock value of existing shareholders, but with CB and BW, bondholders will only consider conversion to new shares if the stock price increases, thereby delaying the dilution of stock value.
In fact, Action Square stated it made this amendment to the articles of incorporation to eliminate restrictions with an eye toward attracting investments from other corporations. After the shareholders' meeting, Jang said at a press conference, "The provision in the articles regarding 'not exceeding 50% of the total number of issued shares' was actually a restriction when I invested in Action Square." Previously, Jang invested 5 billion won in Action Square through a third-party allocation paid-in capital increase, becoming the second-largest shareholder.
He noted, "If companies with good opportunities want to invest in Action Square, receiving such investments would be good for shareholder value and company value," adding, "In the future, whether it was a good decision will be determined by the reactions of the stock market and shareholders when relevant decisions come out."
Meanwhile, Action Square passed an agenda item at the shareholders' meeting to change its name to Nexters and appoint Jang Hyun-guk as an inside director. As the representative of Nexters, Jang will oversee the company's blockchain game and platform businesses, and stated, "We plan to implement various plans to achieve a turnaround to profitability in the game institutional sector this year."