[Asia Economy Reporter Park Hyungsoo] The stock prices of NetGames and Nexon GT, which are in the process of merging, have fallen close to the exercise price of the stock purchase rights. Considering Nexon Korea's shareholding ratios in NetGames and Nexon GT, the possibility of the merger itself being canceled is low. However, if the scale of exercising stock purchase rights increases, cash outflows will rise, potentially disrupting growth strategies.
According to the Financial Supervisory Service's electronic disclosure system on the 20th, NetGames and Nexon GT will hold an extraordinary general meeting of shareholders on March 8 to approve the merger agreement. The merger date is set for March 31, and the merged entity will be named Nexon Games. Nexon Korea holds 56.3% of NetGames shares and 63.2% of Nexon GT shares. For the merger agenda to be approved at the shareholders' meeting, more than 66.7% of voting rights of attending shareholders and more than 33.3% of the total issued shares must agree. The likelihood of the merger agenda being rejected at the extraordinary shareholders' meeting is low.
Among general shareholders, those wishing to exercise their stock purchase rights must express opposition to the merger by March 3 and then request stock purchase by March 26.
The company has proposed stock purchase prices of 17,798 KRW for NetGames and 17,954 KRW for Nexon GT. Since the beginning of this year, NetGames and Nexon GT have fallen approximately 24% and 14%, respectively. NetGames' stock price has dropped below the proposed purchase price, and Nexon GT's price is not significantly different.
After a sharp rise in domestic game stocks in the fourth quarter of last year, the stock prices of NetGames and Nexon GT have fluctuated amid a correction trend this year. On the 3rd, NetGames and Nexon GT briefly rose to 26,350 KRW and 25,450 KRW, respectively, during trading hours. This was driven by expectations that synergy effects after the merger would increase corporate value. NetGames and Nexon GT have set a goal to become a large-scale developer encompassing both mobile games and PC online games through the merger. NetGames has proven its development capabilities by developing mobile games such as 'Hit' and 'Overhit.' It is preparing a multi-platform 'Project Magnum,' which combines third-person shooting games with RPG elements. Nexon GT is a PC game development specialist company generating over 95% of its revenue from the PC game 'Sudden Attack.' Nexon GT is currently developing a new FPS game, 'Project D.'
Before the merger decision, stock prices rose due to expectations for new games, and the announcement of the merger caused a sharp increase in stock prices over a short period. This year, as inflationary pressures increased, major countries including the U.S. have decided to tighten liquidity. This is the reason why game stocks in the domestic market have generally undergone a correction.
If stock prices fall below the proposed stock purchase price, shareholder requests to exercise stock purchase rights are likely to intensify. If the required funds grow to an unexpected level, large-scale expenditures may occur, potentially hindering the merger. If the amount exceeds 300 billion KRW, the merger contract may be canceled. Even if the merger is not canceled, large-scale cash outflows are factors that affect growth. Significant investment is necessary to expand scale and become a game developer encompassing both mobile and PC platforms.
Since there is more than a month left until the exercise of stock purchase rights, it is difficult to estimate the scale of stock purchase requests at the current stock price level. The company is likely to present a blueprint after the merger to gain shareholder support and reduce the scale of cash outflows.
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