This article was displayed on the ChosunBiz MoneyMove (MM) site at 3:59 p.m. on Apr. 1, 2026.
The equity stakes in Line Games held by financial investors (FIs) including private equity fund (PEF) manager Anchor Equity Partners (Anchor PE) have plunged. As exits proved difficult, FIs shunned a large rights offering that Line Games carried out, "150 shares allocated per 1 share," through a shareholder allocation at par. Some even say the equity stake of the No. 2 shareholder, Anchor PE, which exceeded 21% before the capital increase, may have fallen into single digits or lower.
The scenario of "merger or backdoor listing followed by an exit," once floated with Kakao Games' acquisition by Line Yahoo, Line Games' parent, has also lost steam at this point. Because the equity stake has been heavily diluted, even if a merger goes through, the equity in hand would be minimal, lowering the practical benefits of recovery, according to assessments. Some observers say Anchor PE has classified Line Games as "irrecoverable" and has begun cutting its losses.
This large rights offering was conducted at par (500 won), so if one believed in Line Games' normalization, participation would have been a rational choice. Nevertheless, most FIs did not participate, which some interpret as each firm focusing more on locking in and disposing of losses than on minimizing them.
According to the investment banking (IB) industry and the Financial Supervisory Service on the 1st, the equity of Line Games FIs—including Anchor PE, Tencent, and LGM Investment (including preferred shares and individual shareholders)—recently fell from 53.1% to 15.88%, down 37.22 percentage points. The total FI equity in Line Games now falls short of the 21.42% stake Anchor PE once held alone through the special purpose company (SPC) Roonko Entertainment.
The equity of Z Intermediate Global, the largest shareholder of Line Games, surged. Z Intermediate Global, the intermediate holding company of Line Yahoo, increased its Line Games equity from 35.66% to 83.83%. Excluding Line Games' 69,048 treasury shares, Z Intermediate Global's equity tops 84%, effectively establishing a single control structure. With one rights offering, FI influence shrank significantly.
The shareholder-allotted rights offering by Line Games was the trigger. Founded in 2017 with 100% investment by LINE Corporation, Line Games moved to expand by acquiring Zero Games, UZU, and Motif in quick succession, but it failed to produce hits, continued to post losses, and fell into a liquidity crunch. In the end, in Feb., it opted for a large rights offering allocating all issuable shares to existing shareholders.
Most FIs shunned Line Games' rights offering. Aiming to raise 40.9 billion won, Line Games decided to issue 81,851,550 shares at par—133 times its total number of outstanding shares (614,725)—but the shares actually issued came to 23,503,500. A whopping 58,348,050 shares were not chosen by shareholders and were forfeited, leaving the raise at about 11.7 billion won.
Z Intermediate Global took on 20 million shares, about 85% of the 23,503,500 newly issued shares. Notably, Z Intermediate Global said it had finalized plans to invest 10 billion won in Line Games FIs and asked them to put in additional funds to prevent equity dilution, but the total amount of new shares subscribed by shareholders other than Z Intermediate Global was around 1.7 billion won.
Even Anchor PE, the key FI that invested 125 billion won in 2018 to secure 21.42% equity, is seen as having not participated in the new share subscription. The funds Anchor PE would have needed to maintain its Line Games equity were about 6 billion won. Even assuming Anchor PE took all of the remaining allocation (3,503,500 shares) other than Z Intermediate Global's, its equity ratio would fall to the mid-15% range.
Despite the bold allocation plan of 150 shares per 1 share and the favorable condition of issuing at par, it appears burdensome for FIs to inject additional capital when they have been unable to recoup their investments for years. Since its 2017 founding, Line Games has posted annual losses, and as of the end of 2024, accumulated deficits totaled about 302.1 billion won, putting it in a state of complete capital impairment.
The path to a merger exit that drew attention with Line Yahoo's acquisition of Kakao Games has also become meaningless. The market initially viewed Line Yahoo's acquisition of Kakao Games as opening an exit channel for Line Games FIs. The approach involved merging Kakao Games with Line Games or conducting a stock swap (exchange), but equity dilution has left the obtainable equity minuscule.
Some say FIs have classified the Line Games investment as a failed deal and have moved to recognize losses. When the equity stake in a company in a state of capital impairment is diluted to this extent, it is common to reflect an "impairment loss," sharply writing down the asset's book value at the end of the fiscal year. It is effectively telling limited partners, "This investment is essentially negative."
An IB industry official said, "The only cards left for FIs including Anchor PE are to win the 200 billion won-range lawsuit underway and recover principal and interest, or to wait indefinitely until Line Games miraculously turns profitable and its corporate value soars," adding, "Investors who put in money via redeemable convertible preferred shares and hold a refixing right will see only limited equity dilution."
Meanwhile, Anchor PE is pursuing a lawsuit seeking payment of stock purchase consideration to recover its investment from Line Yahoo. The crux is to exercise a put option (the right to sell assets such as shares at a fixed price) to retrieve principal and interest, arguing that Line Games violated a non-compete clause and caused it harm; the appeal is underway. Anchor PE, the plaintiff, lost at the first trial.