This article was displayed on the ChosunBiz MoneyMove (MM) site at 4:29 p.m. on Jan. 28, 2026.
NH Hedge Asset Management is under pressure from losses on an exchangeable bond (EB) investment acquired from Kakao Games. With Krafton's share price, the underlying asset, falling well below the exchange price, mark-to-market losses are estimated to amount to tens of billions of won. As weakened investment sentiment across the gaming industry overlaps with concerns about slowing earnings, observers say setbacks to the exit strategy are inevitable.
According to the investment banking (IB) industry on the 28th, Krafton closed at 263,000 won that day, about 18.8% below the EB exchange price (324,027 won) issued by Kakao Games. Assuming NH Hedge Asset Management fully exchanges and sells in the market the remaining EB holdings worth 207.2 billion won, the sale price would be only about 168.1 billion won. NH Hedge Asset Management is unlikely to exchange into shares in this situation, but it is unavoidable to book an almost 40 billion won valuation loss.
NH Hedge Asset Management is known to have already secured some gains through partial EB exchanges. From 2022 to September last year, it reportedly exchanged a total of 62.75 billion won in EBs, realizing a return of about 5%. At the time, Krafton's stock held in the low-to-mid 300,000 won range, providing an exit opportunity through exercising the exchange right and selling. However, after the 300,000 won level broke in October last year, the stock turned downward, and as it fell to as low as the 230,000 won level early this year, additional exchanges appear to have halted since September last year.
Krafton's weak share price is seen as tied to concerns about a "peak-out" across the gaming sector. The combined market capitalization of major domestic game companies has fallen by nearly 4 trillion won over the past year. The market interprets this not as a simple earnings slump but as reflecting doubts about mid- to long-term growth.
As the slowdown in sales of key intellectual property (IP) becomes structural and uncertainty over new releases grows, brokerages are moving to lower target prices for major game companies. Analysts say Krafton's stock is being weighed down by a revenue structure concentrated in "Battlegrounds" and fading expectations for new titles.
On top of this, there are worries that fourth-quarter results last year may fall short of market expectations. With game revenue declining and one-off expenses such as employee housing support and childbirth incentives increasing, there is a possibility that operating profit will miss the consensus. This is why some say additional downward pressure on the stock could build ahead of the earnings release.
In particular, with the KOSDAQ index surging recently, led by robots and biotech, there are concerns that the trend of selling game stocks to buy other themes could intensify.
The EB terms are a key reason for NH Hedge Asset Management's deepening concerns. The EB issued by Kakao Games has both a zero coupon rate and a zero yield to maturity. It is a structure where money can be made only when exchanging into Krafton shares and realizing a sale gain.
On top of that, at the time NH Hedge Asset Management acquired the EB at a premium to Krafton's reference price. It effectively bet that Krafton's share price would rise at least 15%.
If the stock decline is prolonged, it can demand principal repayment, but with no interest revenue, the opportunity cost is high. The put option for early redemption can be exercised after Feb. 20 next year.
The industry expects NH Hedge Asset Management to maintain a wait-and-see stance for the time being, weighing the timing of a rebound in Krafton's share price rather than exercising the exchange right. However, with investment sentiment across the gaming sector subdued, many say Krafton's stock will not easily recover until a clear new-title momentum emerges. With more than 200 billion won in remaining EB, future earnings trends and the performance of new releases are likely to be the key variables for the investment recovery strategy.