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Nomura, Kim & Chang, Samil PwC face concerns over dented reputations
By Park Jae-hyuk
KineMaster's stock price fell 30 percent, hitting its daily limit-down Tuesday, to close at 28,000 won ($25) as investor sentiment soured following an announcement a day earlier from its largest shareholder that sales talks were facing a setback. Investors had been hoping for a takeover of the Kosdaq-listed company by a global tech giant, such as Google, Facebook, YouTube or Naver.
The mobile video editing service provider's largest shareholder, Solborn, also saw a 20.68 percent drop in its share price the same day.
Nomura Financial Investment, Kim & Chang and Samil PwC, which were involved in the deal as underwriter and advisers, are facing concerns over possible damage to their reputations in the domestic capital market.
According to a regulatory filing by Solborn, major shareholders of KineMaster dropped their plans to sell a combined 55.02 percent stake after they failed to reach an agreement with potential buyers. Solborn said the major shareholders decided to entrust KineMaster CEO Lim Il-taek with their voting rights, so that he could cope with changes in the market more aggressively.
The announcement, which was made a couple of hours after the market closed Monday, came as a surprise because Solborn and KineMaster have continued to disclose the progress of the talks since they confirmed the plan last December. They also made public the underwriter and advisers, unlike most Korean companies that tend to conceal such details until a deal is signed.
Solborn hired Nomura, Kim & Chang and Samil PwC, which boosted investor confidence over the possibility of a global tech firm's unprecedented acquisition of a Kosdaq-listed company.
Expectations mounted further for such a takeover after Hyperconnect, the unlisted Korean startup that operates the Azar video chat app, was sold in February for $1.7 billion to Nasdaq-listed Match Group, well-known for its dating app, Tinder.
Solborn, which had Nomura send investment teasers to multiple potential buyers here and overseas earlier this year, also said in April that it was having talks with them, after signing a non-disclosure agreement.
Such factors raised KineMaster's stock price to above 60,000 won from around 10,000 won.
However, concerns have emerged among investors lately, following a sharp decline in KineMaster's stock price earlier this month and a delay in preliminary bidding that was initially scheduled for March.
The failure of the deal is regarded as bad news for Nomura, which lacks a track record in the local mergers and acquisitions (M&A) market over the past two years. The Japanese investment bank has not been seen in the domestic capital market, since it engaged in the sale of Carver Korea to Unilever in 2017 and investments by Affinity Equity Partners and BlueRun Ventures into SSG.com in 2018.
The KineMaster deal, which was estimated at up to 1 trillion won, was therefore considered key to Nomura's return to the local M&A scene.
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| KineMaster CEO Lim Il-taek, center, poses with then Kosdaq Listed Companies Association Vice Chairman Kim Won-sik, left, and then Korea Exchange (KRX) Kosdaq market division head Jin Soo-hyung at the bourse operator's building in Seoul, Dec. 2, 2011, during a ceremony to celebrate the listing of NexStreaming, which was renamed KineMaster in 2019. Courtesy of KRX |
Reminder of Serome Technology
As part of efforts to calm minority shareholders, Lim promised to attract external investments at "the necessary moment" to back up his strategy to focus more on the use of the company's app than its profitability.
"This is an aggressive strategy that forces us to endure a deficit for a certain period of time," the KineMaster CEO said in a statement. "This is similar to the strategy of Coupang, because it still operates at a loss despite its listing on the U.S. market."
He also vowed to distribute the KineMaster video-editing app for free for a while to counteract TikTok's free video-editing app, CapCut.
However, retail investors have raised doubts about the company.
Some of them mentioned Serome Technology, which was renamed Solborn in 2004 in the wake of a severe conflict between management and shareholders who suffered huge losses when the dot-com bubble burst in the early 2000s. Serome is known as the company that showed the steepest stock price growth in Korean stock market history, with its share price soaring to 282,000 won in March 2000 from 1,890 won in October 1999.
Lim worked for two years for Serome until he became head of NexStreaming in 2002. NexStreaming was renamed KineMaster in 2019.
