Speculation mounts over NCsoft

NCsoft CEO Kim Taek-jin

CEO Kim’s stake sale may have negative effect on new game

By Cho Mu-hyun

Game developer NCsoft is attracting unwanted attention after a recent below market price sale of shares in the company by its chief executive evoked much speculation, while a press conference to trail its forthcoming new game is less than a week away.

NCsoft is scheduled to deliver details of its Massive Multiplayer Online Role Playing Game (MMORPG) Blade & Soul on June 18, to be released sometime in the second half of this year. The game is currently running a beta test available to limited users.

However, as the company’s CEO, Kim Taek-jin, is likely to make an appearance then, it seems most questions from reporters will focus on the boss’s future plans than the game itself.

The company invested 55 billion won ($46.9 million) over five years in developing the new game, while experts believe it to be the only game with a high enough caliber to match the hugely popular Diablo 3 produced by Blizzard Entertainment.

People are already calling it the next Lineage, which NCsoft’ owes its reputation to, and the firm definitely wants no mistakes when releasing the product.

Kim, who was the major shareholder in the company with 24.69 percent, sold 14.7 percent below the market price to domestic rival Nexon that then became the major share holder.

Though no one denies that the alliance of the two game companies has huge potential to change the market ecosystem and likely benefit both parties on future projects, the reason behind the NCsoft CEO’s rather sudden share sale is also drawing speculation about his agenda.

Though the CEO sent an email to company employees on Monday, stating he plans to invest overseas in collaboration with Nexon, he did not comment directly on why he sold the shares.

There are also concerns that it will have a negative effect on the promotion of Blade & Soul.

“If CEO Kim sold the shares just as a cash-out at 250,000 won per share, it seems illogical,” said Hwang Seung-taek, analyst at HanaDaetoo Securities. The stock value of NC was 268,000 won at the time of the sale, and market experts cannot understand why Kim sold it so cheaply.

After the revelation of the sales, share prices dropped to 252,500 won, a steep drop of 7.46 percent. Experts say the drop reflects the concern of investors, who have not yet been notified of how Kim plans to use the 804.5 billion won cash he gained from the sales.

Hi Investment & Securities analysts Lee Sang-hun, though decreeing that the NC and Nexon alliance will likely boost the capability of the two firms to go global in the long term, the short-term effects will not be favorable for Kim’s company.

“In the view of NCsoft, it lost its management premium through the sales and can have a negative effect on investor’s minds,” said Lee.

Jung Jae-woo, an analyst at Woori Investment & Securities concurs: “There are many questions such as (to why Kim) ceded his position as the major share holder, why it was announced before the commercialization of new games, and why the stocks were sold below the market price.” Jung says the questions are likely to dampen investor sentiments.

The company marked a net profit of 12.4 billion won, which is a decline of 27 percent from the previous quarter, and a drastic downturn of 64 percent from the same period of the previous year. The drop is due to the large investments spent on new games, and the firm is in desperate need of increasing profits for the second half of this year.

Numerous rumors circulated about the iconic game developer’s intentions: some speculate that he is planning to enter politics. Others say he is going into the real estate business. A rumor that both Nexon and NCsoft denied was that he was entering baseball to manage the NC Dinos, the ninth club sponsored by the game company.

Though most likely untrue, there is no doubt that people will want to hear what the CEO has to say about them, instead of what he thinks of the new game.

“We are unsure whether the press conference will be held on the planned date, or whether the CEO will make an appearance,” said an NCsoft official, after news of the stock sales surfaced.