Japanese Company with Chinese Capital 'King of Fighters' SNK... Voluntarily Delisted from KOSDAQ Except for the Sweet Spot

[Asia Economy Reporter Jang Hyowon] SNK, a game company holding intellectual property (IP) rights for titles such as ‘King of Fighters’ and ‘Metal Slug,’ is withdrawing from the KOSDAQ market after about three years. During this period, SNK has efficiently depleted most of the approximately 170 billion KRW raised at the time of its IPO through stock option parties for foreign executives, high dividend payments, related-party transactions, and investments in a China fund shrouded in secrecy.

원본보기 아이콘

According to the Financial Supervisory Service’s electronic disclosure on the 18th, SNK submitted a delisting application to the Korea Exchange on the 14th. Currently, the shareholder distribution of SNK shows that the largest shareholder and others hold 20,256,656 shares (96.18%), while minority shareholders hold 805,144 shares (3.82%).

SNK is a company based in Japan, and the shares listed on the KOSDAQ market are KDRs (Korean Depositary Receipts). At the time of delisting, if minority shareholders remain, SNK plans to request all shareholders to sell their shares to the largest shareholder at a price of 37,197 KRW per KDR.

Previously, in November 2020, Electronic Gaming Development Company (EGDC), wholly owned by the MiSK Foundation established by Saudi Crown Prince Mohammed bin Salman Al Saud, purchased a 33.3% stake from SNK’s largest and second-largest shareholders. Subsequently, a public tender offer for voluntary delisting was conducted.

SNK owns famous arcade game intellectual properties (IPs) such as King of Fighters, Metal Slug, and Samurai Shodown. The company mainly provides IPs to game developers and earns licensing fees.

Although the company is based in Japan, its largest shareholder was Chinese-affiliated. At the time of its KOSDAQ listing in May 2019, SNK’s largest shareholder was ZUIKAKU CO., LTD, holding 33.16% of shares. ZUIKAKU is a Hong Kong company wholly owned by SNK CEO Gal Ji-hwi.

SNK raised about 170 billion KRW from the market at an IPO price of 40,400 KRW per share. At the time of listing, it released the previously unavailable ‘Neo Geo Mini,’ boosting sales by about 50% and receiving a high valuation. However, these sales declined the following year, leading to criticism that the sales spike was temporary for the listing. The stock price also dropped about 70% within a year. NH Investment & Securities was the lead underwriter, and Mirae Asset Securities was the co-underwriter.

Subsequently, the 170 billion KRW raised by SNK leaked out through various means. First, SNK spent 80 billion KRW on stock options and dividends. In particular, directors Jeon Se-hwan, Wakayama Shinichiro, CEO Toyama Koichi, and director Sa Pung exercised stock options at 0.11 KRW per share based on Japanese law and received treasury shares purchased by the company for about 10 billion KRW almost for free. Despite a sharp decline in performance one year after listing, SNK paid 70 billion KRW in dividends, about two-thirds of which were taken by the largest shareholder and related parties.

Additionally, SNK purchased mobile games from a related party of ZUIKAKU for about 20 billion KRW. It provided the King of Fighters IP to ‘Redo Interactive,’ a related party of ZUIKAKU, and acquired five games including ‘King of Fighters 97 OL’ for 20 billion KRW.

Furthermore, in September 2020, SNK invested a total of 71 billion KRW in a fund called ‘ZP SNK TMT Fund I L.P.’ created by Jungpyeong Capital. The details of investments made through this fund are unknown. SNK briefly disclosed that the fund was liquidated in 2021.

A financial investment industry official stated, “There have been cases where foreign companies, including those from China, have raised funds using the Korean stock market and then deliberately delisted or committed accounting fraud, but supervision has not been adequate. If such cases accumulate, it will negatively affect other foreign companies listed domestically.”

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.