🧠 Food for thought

Implications, context, and why it matters.

The Line Yahoo deal is a financial lifeline for Kakao Games

• Talk of “funding needs” can gloss over the squeeze Kakao Games was under.
• Operating profit declined for a second straight year, with a 20.9% year-on-year drop last year 1.
• After the share price slid, investors in the March 2021 500 billion won convertible bond issue asked for early repayment instead of converting into stock 1.
• An estimated 300 billion won from Line Yahoo could support expansion while also helping with balance-sheet demands. That can include refinancing debt such as convertible bonds due in September, based on industry-insider comments in the source coverage 1.

A shift from debt financing to a cross-border equity partnership

• Outside the Line Yahoo transaction, Kakao Games also pursued funding tied to its Krafton stake. It decided to issue 270 billion won of private exchangeable bonds that can be swapped into 833,330 Krafton shares 2.
• Exchangeable bonds can bring in cash without an immediate sale of Krafton shares in the market. A swap can still require delivery of shares.
• The Line Yahoo equity deal would lean more on issuing new shares and giving up management rights, rather than sticking with debt or stake-backed structures.
• Kakao Games did not describe the deal as bringing in an operating partner to turn performance around. It described the transaction as a way to meet cash needs and change control.