Recovered to 200,000 KRW Based on Closing Price After 8 Trading Days
Dire Earnings Forecast for Q3...Foreign Ownership Also ↓
Split into 4 Subsidiaries...Voluntary Retirement Executed After 12 Years
The stock price of NCSoft, which had been struggling with chronic poor performance, recovered to the 200,000 KRW range following a bold move involving the physical division of business units and restructuring. Attention is focused on whether Park Byung-moo, NCSoft's co-CEO and a mergers and acquisitions (M&A) expert once known as the "Midas touch," can achieve a structural turnaround.
NCSoft closed at 205,000 KRW on the 21st. This marks the first time in eight trading days since the 8th of this month that the closing price has recovered to 200,000 KRW. During the session, NCSoft's stock rose as much as 5%, reaching 203,500 KRW. However, this is still far below last December's one-year high closing price of 281,000 KRW.
On this day, NCSoft's stock surged after announcing plans to create four subsidiaries (unlisted corporations) through a simple physical division. The development of new intellectual property (IP) will be organized under a studio system, consisting of three game development studios and one AI technology specialist company, totaling four unlisted corporations. The company added a clause stating that if any of the newly established entities are closed or sold within three years, employees will be rehired by the headquarters. The company also plans to implement workforce reallocation and a voluntary retirement program. This is the first time NCSoft has implemented voluntary retirement since 2012.
Co-CEOs Kim Taek-jin and Park Byung-moo conveyed in an internal letter, "The company's financial performance has been continuously deteriorating, putting us at risk of becoming a chronically deficit-ridden company. All members of management deeply acknowledge responsibility for this outcome and sincerely apologize to all employees."
In fact, NCSoft is expected to post poor results again in the third quarter of this year. According to financial information provider FnGuide, securities firms estimate consolidated third-quarter revenue at 392.2 billion KRW and operating profit at 8.6 billion KRW. These figures represent decreases of 7.3% and 47.9%, respectively, compared to the same period last year. The estimated earnings per share (EPS) also dropped by 33% year-over-year to 1,326 KRW. The foreign ownership ratio has also declined from 41% a year ago to around 36% recently.
In the securities industry, positive expectations were initially expressed regarding this physical division. An Jae-min, a researcher at NH Investment & Securities, commented, "We believe this physical division will lead to strengthened competitiveness for NCSoft. Given the company's characteristic difficulty in developing and succeeding with new IPs outside of Lineage, the responsibility management and self-sustainability of subsidiaries could translate into successful new IP outcomes."
Particularly, there is speculation that Park Byung-moo, co-CEO and former corporate M&A expert who successfully sold Hanaro Telecom, will play a key role in this corporate restructuring process. Park was the driving force behind the sale of Hanaro Telecom to SK Telecom just two years after becoming Hanaro Telecom’s president in March 2006. He was recruited at the end of last year and officially appointed after the shareholders' meeting in March this year.
However, from a long-term perspective, there are concerns that this restructuring plan could undermine NCSoft's fundamental competitiveness. A gaming industry insider said, "It is regrettable that executives are not showing responsible leadership first in NCSoft’s traditionally centralized decision-making system. While releasing employees may improve visible numbers immediately, considering the decline in employee morale, top-performing ace-level staff might be the first to leave," expressing concern.
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