This article was displayed on the ChosunBiz MoneyMove (MM) site at 4:45 p.m. on Sept. 4, 2026.
Kakao Games shares have plunged, complicating the calculus for financial investors (FIs) who sold their equity in Kakao VX last year and reinvested in Kakao Games. Initially, there were concerns that exercising tag-along rights would lock in losses because the price offered during Kakao's sale of Kakao Games' management control was below their investment price, but the current share price has fallen even further. With the lockup set to expire next month, FIs are weighing whether to go long-term or to realize some losses and exit.
According to the investment banking (IB) industry on the 4th, major FIs in Kakao Games—Factum Private Equity (PE), Q Capital Partners, and Stonebridge Capital—are reviewing options for handling their holdings ahead of the lockup expiration in Oct.
They invested a total of 108.5 billion won by participating in a third-party allotment paid-in capital increase conducted by Kakao Games in Oct. last year. Factum PE invested 70.3 billion won, Q Capital Partners 23.8 billion won, and Stonebridge Capital 14.4 billion won. The issue price at the time was 15,680 won per share, and the new shares were locked up for one year.
They were shareholders who had originally invested in Kakao VX, which had been a subsidiary of Kakao Games. A sale of Kakao VX was underway and they were set to dispose of their equity, but the transaction fell through after preferred bidder Murex Partners failed to secure financing. The transaction was then settled by Kakao Games directly acquiring Kakao VX equity, and after transferring their Kakao VX equity, the FIs reinvested part of the recovered funds into Kakao Games.
However, the FIs' investment situations are not identical, because the timing, amounts, and exit processes for their Kakao VX investments differ. Factum PE and Stonebridge Capital took losses on their Kakao VX investments and are known to have reinvested more than 80% of the recovered funds in the Kakao Games capital increase. By contrast, Q Capital Partners invested in Kakao VX relatively early, secured some revenue, and reinvested only in the 50% range into Kakao Games.
The problem is that Kakao Games' share price is far below its level at the time of investment. Kakao Games closed at 9,030 won on the day. That is about 42.4% lower than the 15,680 won per share acquisition price for the new shares at last year's capital increase. If FIs forgo tag-along rights and dispose of their equity on the open market, they would have to bear significant losses.
On the other hand, using tag-along rights could reduce the loss. The price at which LY Corp. (Line Yahoo) acquired Kakao Games new shares was 13,747 won per share. If FIs, via tag-along, are applied the same price, the loss versus the new-share acquisition price would be 1,933 won per share, or about 12.3%. Compared with the current share price, they could recover their equity at a price 4,717 won higher per share.
From the FIs' perspective, tag-along is no longer simply a choice that fixes losses. If they forgo tag-along, they would miss the chance to sell at a price above the current level and would have to hold the shares for a long time until Kakao Games' corporate value recovers. Conversely, if they exercise tag-along, even if the price falls short of the original principal, they could exit above the current market prices while blocking the risk of further share declines.
Kakao Games' weak earnings also weigh on the decision to hold long term. Kakao Games posted revenue of 75 billion won and an operating loss of 23 billion won in the second quarter of this year. With a gap in new releases and declining revenue from existing titles, improvement in results is being delayed.
The FIs do not have to decide right away whether to exercise tag-along. Kakao Games is set to launch a new title next month, leaving room for a rebound in the share price. In particular, game stocks can move sharply in a short period after a new release depending on user response and box-office performance, so the FIs are likely to watch the price action until the end. The last possible date to exercise tag-along is through Oct. 23.
An industry official said, "We are still reviewing whether to exercise tag-along," adding, "Kakao Games is set to launch a new title next month, and if measures to boost KOSDAQ come out, the share price could rise, so we have not completely given up on the upside."