NXC's 30% Stake Becomes a Burden After Consecutive Auction Failures... Both Company and Government Are Victims (Comprehensive)

Second Public Auction Also Failed... Switching to Private Contract

[Image source=Yonhap News]

The shares worth 4.7 trillion KRW of the holding company NXC, paid as inheritance tax by the family of the late Kim Jung-ju, founder of Nexon, were again unsold in the second public auction following the first. As the shares that could instantly make the buyer the second-largest shareholder of NXC were consecutively unsold, the company remains exposed to uncertainty, and the government's plan to secure tax revenue through the auction has also encountered setbacks.

According to the Korea Asset Management Corporation (KAMCO) online auction system (Onbid) on the 29th, the second bidding for NXC shares in the public auction ended without a sale. The minimum bid price was 4.7149 trillion KRW.

The shares up for auction represent 29.3% (851,968 shares) of NXC, which the bereaved family inherited after the death of Kim Jung-ju, Nexon's founder, and paid to the Ministry of Economy and Finance as inheritance tax. With the inherited assets reaching around 10 trillion KRW, the family faced an inheritance tax burden of about 6 trillion KRW and paid the tax in shares of NXC. Payment in kind means paying inheritance tax with securities or real estate instead of cash.

In the market, it was speculated that foreign capital such as Chinese IT company Tencent and the Saudi Public Investment Fund (PIF) would participate in the second auction. There was also speculation that NXC might acquire the shares by purchasing its own treasury stock.

Nevertheless, the prevailing view was that the shares would remain unsold in the second auction as well. Even if the Ministry of Economy and Finance acquires all the shares it holds, it would only become the second-largest shareholder, and as NXC is an unlisted company, there are no voting rights. The largest shareholder is Yoo Jung-hyun, the spouse of the late founder Kim Jung-ju, holding 34%, and their two children each hold 17.49%, so the family’s shares still amount to 70% even after paying inheritance tax in kind. Additionally, the fact that the NXC shares are being sold as a whole without division was also seen as an obstacle.

If NXC acquires the shares by purchasing its own treasury stock, no matter how much the value of the shares paid as inheritance tax falls due to the failed auction, the government can only buy the shares at or above the initially assessed value of 4.7 trillion KRW. However, since the shares were initially put up because it was difficult to bear the huge inheritance tax, it is widely believed that reacquiring them would not be easy.

Due to this failed auction, about 30% of NXC shares remain without an owner, leaving the company still uncertain about its second-largest shareholder. If the shares sold at auction are acquired and the buyer becomes the second-largest shareholder, they would not be able to participate in management but could maintain a close relationship with NXC. Given Nexon's ongoing performance growth, if a related company acquires the shares, the uncertainty about the second-largest shareholder would disappear, and business synergies could be realized.

The government's plan to secure tax revenue through the auction has also been disrupted. The Ministry of Economy and Finance is reportedly unwilling to adjust the sale price. However, considering that there were no bidders in both the first and second rounds, there are claims that the Ministry may consider changing the sale method, such as splitting the shares, based on market conditions in the future.

Going forward, the share sale will proceed through a private contract. A KAMCO official stated, "The private contract will proceed at the final unsold price," adding, "Participation in the private contract is only possible at the final unsold price."

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