[Pangyo Now] Despite Record-Breaking Performance, Stock Prices Hit Bottom... IT and Game Industries in Anxiety

Annual Sales 6 Trillion Naver Stock Hits Lowest Point
'Management Embezzlement Controversy Kakao' Also Declines
'Yeongkkeul' Employees' Loss Anxiety Grows

[Asia Economy Reporter Kang Nahum] # Kim Jinkyo (36), who works at an IT company in Pangyo, recently faced the risk of becoming a ‘house poor.’ He had just moved to Pangyo by taking out a credit loan and company support funds through ‘Yeongkkeul’ (borrowing to the limit), but the high interest rates became difficult to bear. He had planned to cover the loan by selling the company stocks he had heavily purchased after the company’s IPO last year and using a generous performance bonus, but continuous stock price declines made even this difficult.

◆Record-breaking performance, stock prices hit bottom= On the 28th, despite the domestic IT and gaming industries achieving record-breaking performances, they are worried due to continuously falling stock prices. Naver posted its highest-ever quarterly earnings in Q4 last year, surpassing 6 trillion won in annual revenue for the first time in company history, but employees’ expressions are not very bright. Due to the U.S. Federal Reserve’s early tightening and concerns over interest rate hikes, the stock prices of domestic and international tech companies, including Naver, have hit yearly lows.

At the beginning of last year, Naver granted stock options of about 1.11 million shares to 3,253 employees. The exercise price is 362,500 won, and they can be exercised starting February next year. However, Naver’s stock price, which rose to 454,000 won in September last year, fell to 303,000 won on the 27th, causing employees to exchange words about their ‘burning anxiety.’

Kakao is in a similar situation. In May last year, the company granted stock options of about 470,000 shares to 2,506 employees. The exercise price is 114,040 won. However, Kakao’s stock price fell to 82,600 won on the 27th amid controversies over infringement on local businesses and allegations of ‘stock option cash-outs’ by affiliate executives.

The SI industry, which is also posting record-breaking performances, is also gloomy. Among the three major SI companies, Samsung SDS, the only listed one, currently has its stock price hovering around 130,000 won. Compared to early last year when it soared to 230,000 won, it has dropped about 40%. This is similar to the level in March 2020 when the stock market bottomed due to the COVID-19 outbreak. Samsung SDS recorded its highest-ever annual revenue of 13.63 trillion won last year. Normally, this would mean expecting performance bonuses, but due to the stock price decline, they now have to be cautious of shareholders.

◆Employees’ Yeongkkeul investments affected by company issues= Losses from employees’ Yeongkkeul real estate and asset investments are also a headache for companies. According to FnGuide, Krafton’s estimated Q4 revenue last year was 622.5 billion won, expected to surpass 600 billion won in a single quarter for the first time since its founding. However, the stock price is at rock bottom. As of the closing price on the 27th, Krafton’s stock price was 264,000 won, about 40% lower than the IPO price. It fell below the psychological defense line of 300,000 won. The evaluation value of employee stock ownership is about 70 million won per person, with losses reaching approximately 50 million won.

There is also the possibility of forced sales. Stocks of Krafton employees who took out loans for employee stock ownership funds through Korea Securities Finance are subject to forced disposal if the stock price falls and the collateral ratio cannot be maintained according to loan terms. Ultimately, Krafton decided to provide additional collateral by depositing new funds for members who borrowed through Korea Securities Finance when acquiring employee stock ownership.

They are also actively buying back their own shares to defend stock prices. Naver decided to pay a dividend of 501 won per common share, totaling about 73.8 billion won, based on 162.1 billion won in resources. The remaining 87.3 billion won after dividends will be used to acquire and cancel treasury shares within this year. KakaoPay, which suffered from controversies over executives’ ‘stock option cash-outs,’ plans to use all profits from executives exercising stock options to buy back treasury shares. Shin Won-geun, the appointed CEO of KakaoPay, also pledged not to sell treasury shares during his term.