Gov't struggles to sell shares of Nexon's holding firm

The logo of gaming giant Nexon is seen outside its building in Seongnam's Bundang District in Gyeonggi Province in this 2016 file photo. Korea Times file

The government is struggling to sell stakes in gaming giant Nexon’s holding firm, NXC, that it received from surviving family members of Nexon founder Kim Jung-ju in inheritance tax.

In May, Kim’s widow, Yoo Jung-hyun, and her two daughters paid a 29.3 percent stake in NXC, or 852,000 shares, to the Ministry of Economy and Finance to pay off an inheritance tax of 10 trillion won ($7.67 billion).

Late Nexon founder Kim Jung-ju / Yonhap

The payment reignited controversy at the time over inheritance tax rates which, today, remain the second-highest in the OECD after Japan.

The maximum tax rate in Korea is 50 percent, lower than Japan’s 55 percent, but far higher than the OECD average of 25 percent.

The tax policy was especially disputed because the finance ministry, without putting in any effort, became the second-largest shareholder of NXC, by taking the 4.7 trillion won-worth stake in the company.

Yoo and her two children still hold the largest stake in NXC, holding a combined stake of 69.34 percent, down from 98.64 percent.

Under the circumstances, the finance ministry put up all of its 852,000 shares in NXC for sale in an open bid hosted by Korea Asset Management Corp. (KAMCO) from Dec. 18 to 19.

The bid, however, failed, and KAMCO tried again this week on Monday and Tuesday.

Whether the reattempted bid will succeed is uncertain, according to financial sources. They noted that the finance ministry insists on selling the NXC shares at a price equivalent to the value it took from Kim’s inheritors.

“The shares should be offered at a lower price,” a source said, noting that a successful bidder will still fall short of acquiring managerial rights even after acquiring all 852,000 shares, and therefore spending the corresponding amount of cash is “not worth it.”

In the meantime, some sources said wealthy investors from abroad could possibly join the bid.

Among the potential bidders are Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia, and Tencent, a Chinse tech conglomerate.

Both companies have shown interest in Korea's gaming industry.

PIF is already the third-largest shareholder of Nexon Japan with a 10.23 percent stake and the second-largest shareholder of NCSOFT with a 9.3 percent stake.

According to the Korea Creative Content Agency, the Saudi game market, which has the greatest growth potential in the Middle East, is expected to grow rapidly from $1.19 billion last year to $1.69 billion in 2027.

Tencent owns a large number of shares in major domestic gaming companies. It is the second-largest shareholder of Krafton with a 13.7 percent stake and the third-largest shareholder of Netmarble with a 17.52 percent stake.