Krafton employees hit by plunging stock price

Krafton founder and Chairman Chang Byung-gyu speaks during the firm's online IPO press conference last summer. Courtesy of Krafton

Employee stock ownership: not always a jackpot

By Anna J. Park

While the news of young salaried workers reaping hundreds of millions of won through employee stock ownership has made headlines following the IPOs of some keenly watched companies, this is not always the case.

As game developer Krafton's stock price continues to plunge since December, the firm's employees, who subscribed for company stocks at last summer's IPO as members of the employee stock ownership association, are now incurring great losses.

After the stock hit its all-time high of 580,000 won ($484) in mid-November, it has been on a continual losing trend for the past two months, hitting 281,000 won as of 2 p.m. on Wednesday. It is not only more than a 50 percent fall from the peak price, but also a more than 44 percent loss from the stock's initial offering price of 498,000 won.

As the stock ownership association holds 351,525 shares, each of the 1,330 employees owns 264 shares on average. It is now estimated that employees' financial damage from the stock ownership association has exceeded an average 50 million won per person.

The employee stock ownership association is a company welfare program that allows a firm's employees to hold 20 percent of offering stocks at the firm's IPO or capital increase as a priority. However, in the case of Krafton, the system is now wreaking havoc on employees who now cannot even sell the stocks during a lock-up period of one year since the company's IPO.

In an effort to assuage anger from employees, Krafton founder and Chairman Chang Byung-gyu posted a message on the firm's online noticeboard on Tuesday.

“It is each person's personal decision as to whether to participate in the stock ownership association, and neither I nor the company can hold unlimited responsibility. However, as a member of management, I feel a heavy responsibility,” he wrote.

“Although I do not have the skill of raising stock prices in the short-term, I can hold the responsibility that I have always had, which is a commitment to raising the firm's long-term value,” he added.

The case of Krafton shows well that a new IPO company's stock ownership association does not always result in a raining down of cash, though there are several others such as SK Biosciences, Hybe and SKIET, where stock ownership associations hit the jackpot following their successful IPOs.