[M&A Insights] Why Did Game Company Krafton Invest in SOCAR?

Krafton Becomes SOCAR's Third Largest Shareholder

Establishment of Autonomous Driving Subsidiary and Acquisition of Real-World Driving Data

Strengthening of Friendly Shareholdings Amid Lotte Rental Uncertainties

KRAFTON, the operator of the online game Battlegrounds, is investing 65 billion won in SOCAR, a car-sharing company. At first glance, it may seem like an unlikely combination, but the securities industry interprets this deal as more than just a simple investment. This is because it is simultaneously tied to expansion into autonomous driving, data acquisition, a future robotaxi platform, and even greater stability in corporate governance.

According to the Financial Supervisory Service's electronic disclosure system on May 8, SOCAR recently announced that it has decided on a third-party allotment capital increase of 65 billion won for KRAFTON. In simple terms, SOCAR is directly allocating newly issued shares to KRAFTON to raise investment capital. The allotment includes 5,098,040 common shares, with an issue price of 12,750 won per share. All funds raised will be invested in a newly established autonomous driving subsidiary, Apex Mobility, which is scheduled to be founded within this month.

After the capital increase, KRAFTON will secure a 13.44% stake and become SOCAR's third-largest shareholder. In contrast, the combined stake of the largest shareholder and related parties will be diluted from 45.91% to 39.74%, while Lotte Rental's stake will decrease from 25.70% to 22.25%.

Data, Not Vehicles, Is the Core Future Asset for SOCAR

SOCAR and KRAFTON plan to establish Apex Mobility, a dedicated autonomous driving company with an estimated value of about 150 billion won, and gradually launch robotaxi and autonomous car-sharing businesses. SOCAR will contribute the 65 billion won raised through the capital increase to this new company, with KRAFTON participating separately as a key investor.

Do-Hyun Ahn, a researcher at Hana Securities, explained, "SOCAR aims to leverage its driving data to form software partnerships and apply these to its car-sharing fleet, with a long-term goal of developing business models for robotaxis and Level 2 (partial automation requiring driver intervention) car-sharing."

Ahn also assessed, "SOCAR holds the largest amount of driving data in Korea, accumulating real-time data on driving, accidents, and vehicle management through FMS (fleet management systems) installed in 25,000 car-sharing vehicles."

Yoon-Chul Shin, a researcher at Kiwoom Securities, emphasized, "The advancement of autonomous driving AI models is directly proportional to the quantity and quality of real-world driving data, and the scale of data acquisition is the key factor determining the technological gap."

He added, "According to the official roadmap, after the launch of Level 2 car-sharing, there are plans to gradually expand to Level 4 (fully autonomous driving in designated areas without driver intervention) ride-hailing services. With the shift to autonomous driving, both operating hours and the customer base are expected to expand, which could fundamentally improve profitability per vehicle."

KRAFTON Joins In... Also Strengthens Friendly Stakeholdings

KRAFTON, for its part, is expanding into non-gaming sectors by leveraging its proprietary AI model ‘Raon,’ which can process text, voice, and more. KRAFTON CEO Changhan Kim commented during the first-quarter earnings call that, regarding the SOCAR investment, "The new company will independently pursue autonomous driving business through AI R&D, while KRAFTON intends to conduct separate physical AI research using the data generated." The idea is to use real-world driving data from autonomous vehicles as AI research assets outside the gaming arena.

The securities industry also suggests this deal is not just an investment in autonomous driving but also serves to stabilize corporate governance. The background involves the Lotte Rental issue. In January this year, the Korea Fair Trade Commission rejected Affinity Equity Partners’ acquisition of Lotte Rental, which increased uncertainty regarding Lotte Rental, the second-largest shareholder.

Researcher Shin noted, "With KRAFTON joining as the third-largest shareholder, the combined stake of the largest shareholder, related parties, and friendly shareholders now exceeds 53.18% of the total issued shares. The two companies have already maintained relationships, including personnel exchanges at the management and board levels, and considering this track record, KRAFTON’s stake is likely to align with that of friendly shareholders."

There is also the issue of stock-backed loans for the largest shareholder. Currently, related parties maintain stock-backed loans worth about 35 billion won. If the share price falls, there is an increased likelihood that additional collateral will be required. Researcher Shin analyzed, "Given that the stock price rose 30% immediately after the capital increase announcement, it appears the management is motivated to support the share price to maintain the collateral structure."

"SOCAR Seeks Breakthrough in Autonomous Driving as Car-Sharing Growth Stalls"

Meanwhile, SOCAR's existing car-sharing business is experiencing slowing growth. SOCAR plans to specify its roadmap for establishing the autonomous driving subsidiary during its first-quarter earnings announcement on May 14.

Researcher Ahn analyzed, "Growth in the current car-sharing market has stagnated, and SOCAR's potential for market share gains is limited. The company is seeking to fundamentally enhance its corporate value through a new business model—car-sharing integrated with autonomous driving technologies such as robotaxis."

He said, "The entry of a new investor like KRAFTON is expected to accelerate SOCAR’s autonomous driving-related business. It will be important to pay attention to the specifics and the timeline for business initiation."

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