Nexon, the government’s second-largest shareholder… why is management still at risk?

With the government becoming the second-largest shareholder of Nexon’s holding company, NXC, all eyes are on the company’s governance changes. NXC has claimed that its management is stable as the family members of the late founder Kim Jong-ju hold the majority of its shares, but changes are inevitable as the government will have to sell its stake at some point. This has led to criticism that the company should have raised funds for the inheritance tax by finding a reliable partner or selling its stake instead of paying the tax.

According to NXC, the Ministry of Strategy and Finance became the second-largest shareholder in February, holding 821,900 shares, or 29.3 percent of the total, in the company. The NXC stake was donated to the government by founder Kim’s family to fund inheritance taxes. The National Tax Service reportedly valued the stake at 4.7 trillion won.

The NXC stake was 100 percent owned by the founder’s family until he passed away. Kim held 67.49% of NXC’s shares, his spouse, Yoo Jung-hyun, held 29.43%, and his two children held 0.68% each. However, when Mr. Yoo inherited 4.57% and his two children inherited 30.78%, NXC’s shareholding became 34% for Mr. Yoo, 31.46% for his two children, and 1.72% for WiseKids, a limited liability company in which each child holds a half interest. The remaining 1.36% is unaccounted for in the inheritance.

With the payment of the inheritance tax, the total shareholding of Mr. Yu and his two daughters was reduced from 98.64% to 69.34%. Mr. Yu’s shareholding remains unchanged at 34%, while his two daughters’ shareholding decreased from 31.46% to 16.81%.

The amount of the inheritance tax is not specifically known, but industry estimates put it at over 6 trillion won. Kim’s estate was reportedly worth about 10 trillion won, including his stake in NXC and its affiliates. An NXC representative said, “It’s hard to put a dollar amount on the share paid for inheritance tax,” but added, “We have settled most of the inheritance tax through the payment. Even after the payment, the founder’s family maintains a significant shareholding, so the company’s stable management is expected to be maintained as the largest shareholder of NXC.”

However, the industry’s view is that the government’s 30 percent stake is an unusual situation. While it is not uncommon for the government to take a 5% or greater stake in small to mid-sized companies through tax payments and become a majority shareholder, it is virtually unheard of for the government to become the second largest shareholder in a global corporate holding company with a market capitalization of trillions of dollars. Once the NIS receives the shares, the ministry entrusts Korea Asset Management Corporation (Camco) to sell them, which will inevitably lead to a change in governance. “The government has always had difficulty selling unlisted stocks메이저사이트,” said an industry insider, “and it will take a long time to sell its stake in NXC.”

Until the government sells its stake, it is possible that it will influence Nexon’s management. “The ministry will not actively participate in the management of NXC,” the official said. However, since it is a natural right as a shareholder to receive dividends and attend shareholder meetings, it is inevitable that it will have some influence. “It is inevitable that it will have an impact on management, for example, by entering interviews when recruiting personnel,” said an industry insider. “It is unknown how it will affect management in the long run in a situation where the government is not friendly to the game industry, such as the issue of stochastic items.”

If the ministry is unable to find a suitable buyer for its stake in NXC, it may end up disposing of the stake at a lower price than it originally assessed. There are also concerns that the stake could end up with a company that has nothing to do with the gaming industry. This raises the question of whether Nexon should have sold its stake to a reliable domestic or foreign partner to raise funds in the first place. It is said that Nexon made an irresponsible decision without thinking about the mid- to long-term future.

Initially, the scenarios for the family to pay the inheritance tax were to defer the payment for 10 years or sell the company outright. The Samsung family also pays about 500 billion won in inheritance taxes annually in five-year installments, and is raising funds in various ways, including selling stakes in affiliates, secured loans, and credit loans.

“For the time being, the rumors of Nexon’s sale can be silenced, but it is disappointing that most of the inheritance tax has been paid,” said Jung-Hyun Wee, a professor at Chung-Ang University and president of the Korean Game Society. “For now, the government can only hope that small investors or those who want to hold the stock for a long time will buy it when it is sold in the future,” he said.