This article was displayed on the ChosunBiz MoneyMove (MM) site at 9:49 a.m. on Mar. 27, 2026.
With Kakao selling management control of Kakao Games to Japan's Line Yahoo, attention is on what choice the second-largest shareholder, the financial investors (FI), will make. These investment firms hold tag-along rights that allow them to sell under the same terms when Kakao sells its equity. But because the sale price for management control is lower than their investment price, exercising the right would inevitably mean a double-digit loss of principal. Fortunately, they can exercise the tag-along right around Oct., so they are expected to watch the share price until then and decide whether to exercise.
According to the investment banking (IB) industry on the 27th, the main FIs in Kakao Games—Factum Private Equity (PE), Q Capital Partners, and Stonebridge Capital—are internally discussing how to handle their equity following the sale of management control at Kakao Games.
The three managers acquired Kakao Games equity in Oct. last year. By participating in a third-party paid-in capital increase carried out by Kakao Games at the time, Factum PE put in 70.3 billion won, Q Capital Partners 23.8 billion won, and Stonebridge Capital 14.4 billion won, for a total of 108.5 billion won.
They were shareholders of the subsidiary Kakao VX, not Kakao Games. Because Kakao planned to sell Kakao VX, they intended to dispose of their equity in that process.
However, when Murex Partners, the preferred bidder for Kakao VX, failed to secure funding and negotiations collapsed, the parent company Kakao Games stepped in to acquire Kakao VX equity directly and sort things out. In the process, the FIs disposed of their Kakao VX equity and used the funds to participate in the Kakao Games paid-in capital increase.
The issue is that the FIs' acquisition price for new Kakao Games shares at the time was 15,680 won per share. In this sale of Kakao Games, the new share issue price set by Line Yahoo is 13,747 won per share. The sale price for existing shares that Kakao is transferring to Line Yahoo has not been officially disclosed, but it is said to be at the same level as the new share price.
As the second-largest shareholders, the FIs hold tag-along rights that allow them to demand that their equity be sold together at the same price and terms when Kakao, the largest shareholder, sells its equity. When the one-year lockup is lifted in Oct. this year, they can exercise this right and transfer their equity to Line Yahoo.
But if they exercise the tag-along right, the FIs would incur a loss of about 1,933 won per share. Converted to a simple return relative to the acquisition price, that amounts to a loss of about 12%.
Kakao Games shares are currently hovering around 13,000 won. With more than six months left until the tag-along exercise window, they can still delay a decision while watching the share price, but the industry expects there is a fair chance the FIs will forgo exercising the tag-along even if the stock continues to struggle.
Instead of taking a loss by transferring their equity to Line Yahoo, they could wait until Kakao Games' corporate value improves under Line Yahoo and the stock recovers above the acquisition price (15,680 won). The scenario would then be to carry out a block deal in the market with a third party to recover the investment.
However, in that case, the funds could be tied up long term and they would have to shoulder market volatility risk in full. It is not exactly known when the last window to exercise the tag-along will be, and there are concerns that, after choosing a so-called "long hold" to avoid losses, they could miss the chance to sell altogether.
An IB industry official said, "For the FIs, it is a difficult situation after they were effectively forced to switch from Kakao VX to Kakao Games and then faced an unexpected drop in the M&A price," adding, "Depending on each fund's maturity and the LPs' preferences, they may split on whether to exercise the tag-along."