SHIFT UP is moving to revamp its board by appointing a top-level (C-suite) executive from China's Tencent as an other non-executive director at this month's shareholders meeting. Observers say Tencent's influence over SHIFT UP's key decision-making is likely to grow.
According to the Financial Supervisory Service's electronic disclosure on the 12th, SHIFT UP will take up an agenda item to appoint Ming Liu (52), global chief executive officer (CEO) of Tencent Interactive Entertainment (IEG), as a candidate for other non-executive director at the regular shareholders meeting on the 26th. An other non-executive director is a member of the board who is a non-full-time director excluding outside directors. Typically, an executive of a major shareholder or a representative of a strategic investor assumes the role, advising or overseeing the company's management activities.
Regarding the background for recommending CEO Liu as an other non-executive director, SHIFT UP said, "He has extensive expertise in global business and investment and a deep understanding of the global game market," and added, "The board judged that the candidate would, through an objective perspective, strengthen the board's decision-making capacity and make a significant contribution to the successful global launch and competitiveness of the games we develop, and therefore recommended him as an other non-executive director."
The latest personnel move by SHIFT UP is seen as a bid to strengthen its push into overseas markets, including China. A 25-year veteran of the game industry, CEO Liu is credited with playing a leading role in growing Tencent's game business revenue to $10 billion (about 14.68 trillion won) last year. Since 2018, he has overseen Tencent's global game publishing and, by actively participating in the development and operation of more than 20 game companies that Tencent invested in or acquired, delivered multiple hits last year.
Under CEO Liu's leadership last year, Tencent produced three global hits. Path of Exile 2, developed by New Zealand's Grinding Gear Games, surpassed 6.8 million copies sold after release, while Dune: Awakening from Norway's Funcom and Dying Light: The Beast leveraging the flagship intellectual property (IP) of Poland's Techland each sold more than 2 million copies.
In 2023, Tencent acquired an equity stake in Techland for $1.6 billion (about 2 trillion won), at a time when the Dying Light series had stalled. Bloomberg News reported in an interview with CEO Liu in Dec. last year that Liu sent Tencent staff to Poland to improve Techland's development process and management systems. CEO Liu has supported turnarounds by dispatching so-called "strike teams" to game developers struggling with game development, company operations, or publicity.
Tencent's status as SHIFT UP's second-largest shareholder is also cited as one reason for deciding to appoint CEO Liu as an other non-executive director. As of the end of last year, Tencent, through its affiliate Aceville Hong Kong Limited, held a 34.48% equity stake in SHIFT UP as the second-largest shareholder. The equity gap with the largest shareholder, SHIFT UP CEO Kim Hyung-tae and relatives (38.89%), is 4.41 percentage points (p).
In 2022, as SHIFT UP's flagship title Goddess of Victory: Nikke became a hit, the two companies' partnership deepened. CEO Liu led the establishment of Tencent's global publishing (distribution) brand Level Infinite, and Level Infinite handled the global service for SHIFT UP's flagship Goddess of Victory: Nikke. With SHIFT UP focusing on development and Tencent taking charge of publishing, the collaboration delivered results, after which Tencent increased its equity investment in SHIFT UP to become the second-largest shareholder.
Tencent is also expected to handle publishing for SHIFT UP's next title, Project Spirit, which is under development for a 2027 release. With Tencent holding the global licensing rights, CEO Liu is expected to serve as a key communication channel in discussing the direction of the new title's development and business strategy.
Last year, SHIFT UP posted solid results on the back of its flagship titles Goddess of Victory: Nikke and Stellar Blade. But because it is highly dependent on the two IPs and has no other new title in the pipeline besides Project Spirit, the share price has been sluggish. After listing in Jul. 2024 at an offering price of 60,000 won and at one point topping 80,000 won, SHIFT UP shares have recently fallen to around 30,000 won.
Some worry that this personnel move will further increase SHIFT UP's dependence on Tencent. Given that CEO Liu has delivered results by actively participating in the operations of overseas game companies that he has invested in or acquired, there are concerns that SHIFT UP's management independence could be weakened.
Wi Jeong-hyeon, a professor in the business administration department at Chung-Ang University, said, "Although this appointment of an other non-executive director does not make it highly likely that Tencent will directly interfere in management, the mere fact that, through a senior executive, it can see all the detailed matters discussed by the board and easily grasp SHIFT UP's management strategy leaves room for future involvement in management."
Beyond SHIFT UP, Tencent holds the position of second-largest shareholder in Krafton (13.86%) and Netmarble (17.52%) and third-largest shareholder in Kakao Games (3.88%), and it has also maintained long-term partnerships with Nexon, Smilegate, and NCSOFT. The flagship IPs of most major Korean game companies are serviced in the Chinese market with Tencent handling publishing.
A source in the game industry said, "Because Tencent's publishing capabilities are outstanding, from SHIFT UP's perspective there is no choice but to strengthen strategic collaboration," adding, "Domestic game companies' dependence on Tencent is deepening when it comes to entering and expanding in the Chinese market."