Netmarble's Surprise Leadership Change... Signal for Netmarble Neo's IPO Relaunch?

[Korea Financial Times, Kim JaeHun] As Kwon Young-sik, co-CEO of Netmarble, resigns from his position as representative director and internal director after about 11 years, expectations for the re-launch of the IPO (Initial Public Offering) of Netmarble Neo, where he also serves as CEO, are gaining momentum. Netmarble Neo improved not only its performance but also profitability last year with the success of "Solo Leveling: ARISE". Additionally, as it is responsible for Netmarble's major large-scale new game lineup, the need for substantial investment is apparent.

According to Netmarble on the 10th, the company will vote on transitioning from the current co-CEO system of Kwon Young-sik and Kim Byung-gyu to a sole CEO system led by Kim Byung-gyu at the regular shareholders' meeting on the 31st. CEO Kwon Young-sik is stepping down from his positions as representative director and internal director about 11 years after taking office as the CEO of Netmarble (then Netmarble Games) in 2014. Do Ki-wook, Netmarble's CFO, has been recommended for the vacant internal director position.

While CEO Kwon Young-sik is resigning from his position at Netmarble, he will retain his role as the CEO of Netmarble Neo, Netmarble's development subsidiary. He will also participate as a key decision-maker in the Management Strategy Committee, newly established earlier this year.
In fact, CEO Kwon's term was set to end in March next year, with one year remaining. The industry speculates that this unexpected personnel change by Netmarble might be a preliminary step towards fully relaunching Netmarble Neo's IPO.

Netmarble Neo submitted a preliminary review application for listing on the Korea Composite Stock Price Index (KOSPI) to the Korea Exchange at the end of last year. It was reported that the IPO could be completed as early as the first half of this year. Under Korean commercial law, directors of a parent company may violate the "prohibition of concurrent business for directors" if they concurrently serve as representatives or directors of a listed subsidiary.

Notably, the Management Strategy Committee that CEO Kwon Young-sik will participate in was established to enhance synergy between game business strategies and Netmarble companies. CEO Kwon Young-sik will serve as a bridge between strengthening the development capabilities of Netmarble's subsidiary developers and Netmarble's game business strategy, based on his extensive experience.

CEO Kwon Young-sik joined Netmarble in 2000 as the head of the publishing business division when the company was established. Even after Netmarble was sold to CJ Group in 2004 and renamed CJ Games, he continued to lead the game business, driving growth through the publishing of games like "MaguMagu Series" and "Sudden Attack".

Furthermore, as the mobile game market began to fully activate with the emergence of smartphones in the 2010s, he led the restructuring of the business from PC game portal-centric to mobile-centric, growing Netmarble into one of the 3N (Nexon, NCSOFT, Netmarble) pillars.

Given that CEO Kwon Young-sik has led Netmarble's growth for over 20 years, he is considered the ideal candidate for the important strategy of listing and growing Netmarble Neo, Netmarble's core subsidiary.

Netmarble Neo is a subsidiary that has developed Netmarble's core titles based on popular IPs, such as "Lineage2 Revolution" and "Ni no Kuni: Cross Worlds". Previously, in 2021, it selected Mirae Asset Securities and NH Investment & Securities as IPO underwriters and pursued an IPO. However, it withdrew the IPO once due to global economic downturn caused by COVID-19 and criticism over the splitting of subsidiaries like Netmarble Monster and Netmarble N2.

Additionally, the lack of a definitive IP advantage was pointed out as a weakness. In fact, although Lineage2 Revolution and Ni no Kuni: Cross Worlds were initially popular upon release, they failed to produce subsequent hit titles. As a result, performance also declined.
When pursuing the IPO in 2021, Netmarble Neo recorded annual revenue of 138.8 billion KRW, operating profit of 74.1 billion KRW, and net profit of 60.5 billion KRW. However, in 2022, the year after withdrawing the IPO, revenue dropped to 93.9 billion KRW, operating profit to 24.3 billion KRW, and net profit to 19.6 billion KRW. In 2023, the downward trend continued with revenue of 55.2 billion KRW, net profit of 1.7 billion KRW, and an operating loss of 3.6 billion KRW.

Netmarble Neo's IPO, which had been drifting away with declining performance, began to gain momentum again in 2024 with the success of "Solo Leveling". Solo Leveling achieved 50 million global cumulative users within 5 months of its release and won the grand prize (Presidential Award) at last year's "Korea Game Awards", demonstrating both profitability and gameplay quality.

Thanks to the success of Solo Leveling, Netmarble Neo recorded revenue of 100.2 billion KRW and operating profit of 49.4 billion KRW on a cumulative basis for the third quarter of last year. Revenue increased by 128.2% compared to the same period the previous year, while operating profit surged by 24,600%. Net profit also reached 39.8 billion KRW, already surpassing the previous year's annual performance in all aspects.

Analysis suggests that Netmarble also considers this the right time for an IPO, as Netmarble Neo has resolved IP power and profitability issues through the global success of Solo Leveling. Additionally, Netmarble Neo is currently developing Netmarble's core large-scale projects, including AAA-class new titles like "Game of Thrones: King's Road", "The Red: Legacy of Blood", as well as "The King of Fighters: AFK" and "Solo Leveling Steam Version". It is at a point where securing funds through an IPO is necessary.

A Netmarble official stated regarding Netmarble Neo's IPO, "It is true that we are preparing for an IPO re-listing," but added, "The exact timing and plans for the listing are yet to be determined."

Kim JaeHun (rlqm93@fntimes.com)