Nexon, listed on the Japanese stock market, went straight to the upper limit after it released a special dividend close to 3 trillion won. The market reacted immediately as the company posted record results on the back of hits from major intellectual property (IP) including "MapleStory" and "ARC Raiders," and moved to a large-scale shareholder return funded by cash secured from its Korean subsidiary, Nexon Korea.
By contrast, the mood at NEXON Games, a Nexon affiliate listed on the domestic stock market, is markedly different. Not only is the Japanese Nexon's strong performance not directly reflected in NEXON Games' results, but with weak earnings, its share price remains 38% lower than a year ago.
◇ Nexon Korea secures 3.5 trillion won… Japanese Nexon hits a "dividend jackpot" of historic scale
According to the game industry on the 18th, Nexon said on the 13th that it would pay a special dividend of 415 yen per share. Including the regular dividend of 60 yen, this year's dividend per share is 475 yen. That is more than 10 times last year's 45 yen. The special dividend aggregates alone amount to a hefty 324 billion yen (about 2.9 trillion won).
The market reacted immediately as the dividend yield reached about 19% based on the closing price of 2,520 yen on the announcement date. On the 14th in Tokyo, Nexon shares finished trading up 20%, the daily limit, at 3,022 yen. In after-hours trading after the close, they even surged to 3,580 yen.
Nexon was able to pursue such a generous dividend because its earnings backed it up. Nexon's first-half revenue of 273.3 billion yen, operating profit of 89.4 billion yen, and net profit of 86.9 billion yen were record highs for a half-year. Revenue in the second quarter for its key IP MapleStory jumped 63% from a year earlier, hitting a record quarterly high. In addition, ARC Raiders, aimed at Western markets, surpassed cumulative sales of 16.3 million copies just nine months after launch.
Cash remitted up from its Korean subsidiary, Nexon Korea, also helped power the large special dividend. In June, Nexon Korea decided on an interim dividend of about 3.58 trillion won to its parent, Japanese Nexon. That is more than three times last year's annual dividend aggregates of 1.17 trillion won. Cash accumulated through the domestic game business flowed up to the listed Japanese parent and became the funding source for this special dividend.
◇ Stripping out accounting optics, core business is sluggish… NEXON Games couldn't smile
However, the strong results and special dividend at Japanese Nexon do not carry over to Korea's NEXON Games. NEXON Games is a game developer under Nexon Korea that developed "V4," "Blue Archive," "SUDDEN ATTACK," "HIT2," and "The First Descendant." It signs contracts with major publishers and receives a portion of game revenue as royalties and the like. The hit performance of MapleStory or ARC Raiders is not directly reflected in NEXON Games' results.
NEXON Games' consolidated revenue for the second quarter this year was 41.5 billion won, up 7.5% from a year earlier. Operating profit was 10.7 billion won, swinging to a profit from an operating loss of 21.8 billion won in the same period a year earlier. Net profit also came in at 8.7 billion won, escaping a net loss of 23.2 billion won in the same period last year.
However, it is hard to assess that the profitability of the core business has fully recovered based on the numbers alone. One-off factors played a major role in reducing operating expenses. In May 2022, NEXON Games granted Chief Executive Park Yong-hyun a performance-linked stock compensation of 2 million treasury shares to be given free of charge. Although the shares were to be received only if certain share price and revenue conditions were met while serving more than four years, the compensation failed to meet its vesting conditions in the first half of this year and was entirely extinguished. Accordingly, the stock-based compensation expense previously recognized as an expense was reversed in the second quarter.
The share price is also struggling to gain momentum. On the 18th under KRX standards, NEXON Games closed at 8,960 won. Compared with the Aug. 18 closing price of 14,510 won last year, it is down 38%.
◇ Will Nexon's "dividend effect" raise expectations for shareholder returns at domestic game companies?
Meanwhile, Nexon's bold dividend is expected to further heighten interest in shareholder return policies at domestic game companies. Unlike manufacturing, where large-scale investment in factories or production facilities is essential, the game industry can use cash, excluding funds needed for new title development and mergers and acquisitions (M&A), for shareholder return value.
Krafton, after executing 300 billion won in share buybacks and 99.6 billion won in dividends in the first half, plans to buy back an additional 100 billion won of its own shares in the third quarter and cancel them. With the success of Crimson Desert, Pearl Abyss is also canceling 50% of its treasury shares for the first time since its founding and pushing a 100 billion won share buyback. However, this expansion of shareholder returns has not been enough to reverse sluggish share prices.
A game industry official said, "Recently, game companies have been strengthening shareholder return policies such as dividends and share cancellations in line with performance," adding, "As Nexon received a positive response from the market with a dividend of an unusual scale, investors' calls for more aggressive shareholder returns at domestic game companies could grow."