Game company Smilegate received a damages ruling in the first trial over a dispute surrounding its initial public offering (IPO) in the 100 billion won range and plans to appeal.
On the 2nd, the Civil Agreement Division 31 of the Seoul Central District Court ruled in favor of the plaintiffs in the first trial of a damages lawsuit filed against Smilegate, ordering it to pay 100 billion won and annual 12% interest from Dec. 2023.
The lawsuit was filed by Rhinos Asset Management, and Mirae Asset Securities, which brokered the convertible bond (CB) transaction, joined as a plaintiff.
The court did not accept Smilegate's argument that its obligation to pursue a listing had expired. In response to the company's claim that the IPO obligation disappeared based on valuation losses that arose when it reclassified the convertible bonds from equity to liability, the court said it ran counter to the principle of good faith and did not recognize its effect.
Rhinos Asset Management purchased about 20 billion won worth of Smilegate CBs in 2017 and agreed to pursue a listing if profits exceeded a certain level. After performance improved significantly thanks to the popularity of "LOST ARK," it demanded an IPO push in 2022.
However, Smilegate countered that its obligation to list had expired, saying a change in accounting standards resulted in a net loss of 142.6 billion won in 2021.
The court pointed out a problem with this logic, noting that when performance improves, valuation losses grow and net profit decreases, creating a circular structure under which the obligation to list disappears for that reason.
The court also found that Smilegate's 2021 net profit was 228.9 billion won, meeting the contract conditions, and that it had a duty to file for a preliminary listing review by the end of June 2023.
After the ruling, Smilegate said it plans to file an appeal after carefully reviewing the written judgment.