SmilegateRPG (now Smilegate Holdings), the developer of the game "LOST ARK," lost a damages lawsuit worth about 100 billion won against Rhinos Asset Management.
According to legal sources on the 2nd, the Civil Agreement Division 31 of the Seoul Central District Court (Presiding Judge Nam In-su, Director General) ruled for the plaintiff in a lawsuit filed by Rhinos Asset Management against Smilegate Holdings seeking about 100 billion won in damages and payment for a sale.
Rhinos Asset Management filed the suit against Smilegate in Nov. 2023. Back in Dec. 2017, Rhinos Asset Management invested 20 billion won in SmilegateRPG through convertible bonds (CB), attaching a contractual condition that "if net profit for the fiscal year immediately preceding the CB maturity (Dec. 20, 2023), i.e., 2022, is at least 12 billion won, an initial public offering will be pursued."
After Smilegate posted 364.1 billion won in operating profit in 2022 and its corporate value rose to several trillion won, the company still did not list, and Rhinos Asset Management argued, "We met the listing requirement, yet the listing was delayed, causing at least 100 billion won in losses."
Smilegate countered that the result is different when accounting standards are applied. It said a 535.7 billion won CB valuation loss occurred due to the rise in corporate value, and after reflecting this loss, it recorded a 142.6 billion won net loss, failing to meet the listing requirement.
This is because, under International Financial Reporting Standards (IFRS), a CB is viewed as a liability that increases with changes in corporate value. Citing this, Smilegate concluded it had no obligation to list and delayed the initial public offering (IPO), adding that considering reliance on "LOST ARK" and signs of slowing results, it was not the time to rush a listing.
However, the court did not accept Smilegate's argument. As business performance improves and net profit rises, the obligation to list is triggered; if the conversion right is assessed as a liability at that point, it creates a "circular logic" that hollowes out the obligation to pursue the contract.
In the end, considering the parties' contractual terms, the court found that Smilegate had an obligation to pursue a listing and must pay 100 billion won in damages.