Crypto Slide, Gaming Slowdown Wipe Billions Off Tycoon’s Fortune

Bookmark

Kim Jung-ju, the billionaire behind Nexon Co., is having a turbulent month.

Shares of the Tokyo-listed gaming company have plunged 21% since it forecast a decline in profit on May 12, suggesting its strong performance when the pandemic kept people indoors won’t be sustained as some countries reopen.

Crypto Slide, Gaming Slowdown Wipe Billions Off Tycoon’s Fortune

That’s erased about $1.9 billion from the South Korean entrepreneur’s net worth, reducing his fortune to $8.1 billion, according to the Bloomberg Billionaires Index.

On top of that, Kim’s diversification away from gaming into areas including cryptocurrency is facing obstacles. Bitcoin has dropped almost 38% since it rose to a record in April, a stark example of the swings in the prices of virtual coins that have left some mainstream investors skeptical.

Kim, 53, has been an avid supporter of digital currencies, and has been acquiring cryptocurrency exchanges in recent years. Nexon also bought $100 million worth of Bitcoin last month.

“It was bound to come down,” Matthew Kanterman, an analyst with Bloomberg Intelligence, said of Nexon’s earnings forecast. “Last year was a high base and they are not going to replicate that,” he said. On Bitcoin, “corporations don’t like buying stuff with too much volatility,” he said, suggesting Nexon is unlikely to add to its purchase for now.

Crypto Investments

Even before Nexon bought Bitcoin, Kim’s holding company NXC Corp., which owns almost half of Nexon, snapped up 65% of Korbit Inc., a crypto exchange in South Korea, in 2017.

The following year, NXC’s subsidiary in Europe acquired another cryptocurrency exchange: Luxembourg-based Bitstamp.

Korbit’s book value plunged to about 3.1 billion won ($2.8 million) at the end of last year from about 96 billion won at the end of 2017, according to NXC’s financial statements for 2017 and 2020. A spokesman for NXC said there’s no plan to sell the exchanges that it bought.

Kim was also keen to acquire Bithumb, one of South Korea’s largest virtual currency exchanges, according to local media reports earlier this year. The NXC spokesman declined to comment.

Kim declined to be interviewed for this story. Owen Mahoney, Nexon’s chief executive officer, wasn’t available for comment.

Crypto Slide, Gaming Slowdown Wipe Billions Off Tycoon’s Fortune

The company pointed to Mahoney’s Medium post in April on the Bitcoin purchase. Nexon sees Bitcoin as a form of cash that’s likely to retain its value, he said. The Bitcoin purchase represents less than 2% of the firm’s cash and equivalents.

“The technology underlying BTC and other cryptocurrencies is beginning to creep into many areas of day-to-day use, such as payments, digital collectibles and other areas that are increasingly relevant for companies like ours,” Mahoney wrote.

Embracing Crypto

Other big names in the gaming industry have also embraced cryptocurrencies and related blockchain technologies.

Kakao Games Corp., a subsidiary of South Korea’s most popular mobile-messenger operator Kakao Corp., added to its holdings in blockchain technology company Way2Bit Co. last year, becoming the largest shareholder. Mobile game publisher Gamevil Inc. invested last month in crypto exchange Coinone Inc.

“As finance and payment systems are quite important in games, developers are thinking of ways to integrate blockchain technology to improve what they have now,” said Lee Seung-hoon, an analyst at IBK Securities Co. in Seoul. “Their investments are more like R&D efforts at this stage.”

Square Enix Holdings Co., the Japanese publisher of popular role-playing games such as Dragon Quest and Final Fantasy, was among the investors that injected $2 million in cash and cryptocurrency into Ethereum-based game developer TSB Gaming Ltd. in 2019.

‘Significant Presence’

“Games using blockchain are no longer in their infancy and are gradually coming to represent a more significant presence,” Yosuke Matsuda, the Japanese firm’s president, said in a New Year’s letter last year.

Kim founded Nexon in South Korea in 1994 after majoring in computer science and engineering at Seoul National University. In 2011, Nexon listed in Japan.

Two years ago, he considered selling his stake in the company, held through NXC, triggering discussions with major players including Tencent Holdings Ltd. and Hillhouse Capital. He scrapped the plan when he couldn’t find a suitable buyer, according to local media reports.

Nexon, famous for hit titles such as MapleStory and KartRider, posted net income attributable to its parent’s owners of 69.7 billion yen ($639 million) in the first six months of 2020 as lockdowns forced people to spend more time at home. For the same period this year, it forecast a range from 55 billion yen to 58.3 billion yen. The high end of the range would represent a 16% drop from last year.

Kim said in a rare interview with South Korean newspaper Chosun Ilbo in 2012 that worrying about keeping up with new technological trends can even disrupt his sleep.

“In order to survive, I have to accept new things,” Kim said.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.