Kakao Games Employees Celebrate Big Win of 300 Million Won... Smiles All Around from Stock Options

Stock Option Value Increases by 120 Billion Won Compared to IPO Price
Average Valuation Gain of About 300 Million Won Per Person Among 444 Employees Granted Stock Options
Employees Participating in Employee Stock Ownership Plan Show Smaller Valuation Gains

[Asia Economy Reporter Minwoo Lee] Kakao Games recorded a 'Ttang Sang' (opening price double the IPO price followed by the upper price limit) on its first day of listing, enabling employees who received stock options to realize an average valuation gain of about 300 million KRW per person.

According to Kakao Games' investment prospectus on the 10th, the company granted a total of 6,222,500 shares to 444 employees (including duplicates) over nine rounds from December 2015 to January this year. As of the end of last month, the number of unexercised shares was 3,219,664.

The exercise prices of the stock options vary from 5,981 KRW to 17,192 KRW, which corresponds to approximately 25% to 71.6% of the IPO price of 24,000 KRW. On this day, Kakao Games achieved 'Ttang Sang,' with the price rising to 62,400 KRW, 160% of the IPO price. The value of the stock options increased by 123.6 billion KRW compared to the IPO price. Simply dividing by 444 employees, excluding the profit differences based on individual exercise prices, results in an average valuation gain of about 278 million KRW per person.

Among the company officials who received stock options, former CFO Nam Jae-kwan enjoyed the largest valuation gain. As of this day, Nam, who holds 127,000 stock options (125,000 shares at an exercise price of 5,095 KRW and 2,000 shares at 14,727 KRW), is estimated to have a valuation gain of about 7.3 billion KRW. Co-CEO Cho Gye-hyun of Kakao Games, who holds 150,000 stock options at an exercise price of 14,727 KRW, is also expected to gain about 7.2 billion KRW in valuation.

Employees who purchased Kakao Games shares at the IPO price through the employee stock ownership plan (ESOP) are also expected to realize significant valuation gains. The number of Kakao Games ESOP shares is 1,522,088 (9.51%). Based on the 'Ttang Sang' price, the valuation gain exceeds 58.4 billion KRW.

However, evaluations suggest that a 'jackpot' like SK Biopharm is unlikely. Only a portion of employees received stock options, and the ESOP volume itself is small. Moreover, the number of employees is larger than SK Biopharm’s, so the allocation per person is inevitably smaller. A Kakao Games official said, "Kakao Games alone has about 400 employees, more than SK Biopharm’s 200, and including subsidiaries and affiliates, the number of ESOP participants exceeds 1,000. It is difficult to achieve a jackpot with ESOP alone, even if stock options are excluded."

Therefore, a wave of resignations like SK Biopharm is not expected to continue. Many SK Biopharm employees chose to resign to realize profits. ESOP shares are locked for one year after listing and cannot be traded, but if employees resign, they can freely sell immediately. This is not possible here. Meanwhile, Kim Ki-hong, CFO of Kakao Games, emphasized at an online IPO briefing last month, "Stock options and ESOP are systems designed for employees to have ownership, grow together long-term, and maintain long tenure," adding, "We do not expect the concerning resignation wave to occur."

This content was produced with the assistance of AI translation services.