This year, Korea's stock market has continued an unrelenting rally led by semiconductor stocks, but game stocks have struggled to rebound. The KOSPI started the year around 4,300, topped 7,000 on the 10th of last month, and even briefly surpassed 8,000 earlier this month, but shares of most domestic game companies, except NC, have largely remained on a downward trend.
Exhausted by a prolonged slump in share prices, small shareholders of game companies are taking collective action, demanding shareholder-return policies.
◇ Game stock slump spares neither Krafton nor Nexon
Krafton's share price closed at 232,000 won on the 10th, down 5.1% from the previous day. Based on the Jan. 2 close of 248,000 won, Krafton shares have fallen 6.5% this year alone. Despite steady results powered by the continued performance of its flagship "Battlegrounds," and plans to expand into new businesses such as artificial intelligence (AI), robotics and Autonomous Driving, the company's shares have repeatedly swung between the 200,000–250,000 won range.
Even positives such as news of new titles' success or partnerships with big tech companies were not enough to lift the stock. Krafton shares surged intraday this month on news of a meeting between Nvidia CEO Jensen Huang and Krafton Chair Jang Byung-gyu, only to give back gains, and briefly spiked to 300,000 won on news of strong performance for last month's new release "Subnautica 2," before falling back into the 200,000 won range.
If anything, Krafton is holding up relatively well. Other game companies saw even steeper declines. Netmarble shares have fallen more than 19% this year, and Wemade is down 37%. Pearl Abyss shares have struggled despite a first-quarter earnings rebound driven by the global success of the new title "Crimson Desert." After the March release of "Crimson Desert," the share price at one point soared to 77,400 won, but has since returned to the 30,000–40,000 won range, the level before the new release.
Devsisters also saw its share price halved this year after "Cookie Run: OvenSmash," a mobile action game based on the Cookie Run intellectual property (IP) released in March, fell short of expectations. The share price, which was 33,200 won at the start of the year, now stands around 14,060 won. In addition, Kakao Games (-44.7%), which is slated to be acquired by Japan's LY Corporation, Com2uS (-16.5%), Neowiz (-23.8%) and SHIFT UP (-12.7%) also all underwent corrections.
Nexon, listed on the Tokyo Stock Exchange in Japan, is in the same boat. Despite a buoyant Japanese market, Nexon shares fell about 44.8% from 3,997 yen at the start of the year to 2,207 yen as of the 10th of this month. Although Nexon posted record first-quarter results, expectations of a slowdown in revenue for key games in the Chinese market in the second quarter are seen as dousing investor sentiment.
An industry source said, "As the downturn in the game industry has prolonged, overall expectations for game stocks appear to have weakened."
In fact, among major game companies, only NC's share price has risen this year, up 18.7%. Analysts say its strategy to expand its AI business, centered on the AI subsidiary NC AI rather than games, has had a positive effect on investor sentiment. NHN, which is expanding its AI and cloud businesses, has also gained 31.4% this year.
◇ Angry small shareholders visit headquarters to demand shareholder returns
As the slump in share prices dragged on, small shareholders of game companies began more actively demanding shareholder-return policies. Small shareholders of Pearl Abyss, saying the company was neglecting shareholder-value enhancement and share-price management, announced a planned rally. On the 9th, after the market closed and a day before the rally that had been scheduled for the 10th, Pearl Abyss announced a shareholder-return policy that included dividends and the retirement and purchase of treasury shares.
Pearl Abyss said it would pay annually, as dividends, the larger of 10 billion won or 10% of net income for the year, and to enhance shareholder value it would retire 1,403,945 shares—50% of 2,803,945 treasury shares held (4.4%). On news of its first dividend since its founding, Pearl Abyss shares closed at 40,100 won on the 10th, up 3.9% from the previous day.
Devsisters, facing strong protests from small shareholders, also decided to hold a small shareholder meeting on the 12th, led by Chief Financial Officer (CFO) Lim Sung-taek. Last month, to address deteriorating results due to lackluster performance of new titles, the company announced a tough reform plan that included unpaid management by CEO Cho Gil-hyun and other executives.
Small shareholders of Wemade visited the company's headquarters in Seongnam, Gyeonggi Province, on the 2nd and delivered to management a "12-point demand" that included the purchase and retirement of treasury shares and limits on executive compensation. Shareholders demanded the purchase and retirement of treasury shares equal to at least 3% of outstanding shares, disclosure of development status for the new title "Night Crows 2," and restrictions on raises to executive salary and bonuses through 2027.
The industry expects that as small shareholders band together and intensify pressure for shareholder returns, game companies will have no choice but to strengthen related policies going forward. Some mid-sized game companies have already moved preemptively.
Webzen announced a shareholder-return program worth 90 billion won, about 20% of this year's market capitalization, and on the 10th disclosed an additional purchase of 10 billion won in treasury shares. Com2uS retired treasury shares equal to 5.1% of outstanding shares at the start of the year and decided on 14.8 billion won in cash dividends. Neowiz, under its mid- to long-term shareholder-return policy, said it will return 20% of operating profit to shareholders over three years from 2025 to 2027. SHIFT UP said it will pursue a shareholder-return policy in the second half of this year.