After PAW Games, founded by the core development team of the MMORPG 'Seven Knights', was acquired by NEOWIZ, it has been underperforming, raising questions about NEOWIZ's investment strategy. Once recognized for its excellent development capabilities and operational competence, PAW Games has now accumulated massive losses, earning it the reputation of having a 'minus hand.'
◇ The aftermath of the failure of the new title 'Legend of Heroes'
According to industry sources on the 10th, NEOWIZ invested a total of 73.6 billion won to secure 51% equity of PAW Games from 2020 to 2023. PAW Games was assessed to possess proven development capabilities with consecutive hits like 'Kingdom: The Flame of War' and 'Priston Tale M.'
However, the new title 'Legend of Heroes: Kagaab Trilogy', which PAW Games ambitiously launched last August, failed to achieve commercial success. Right after its release, it ranked 25th in Google Play revenue and 34th in the Apple App Store, essentially failing to establish itself in the market.
Last year, PAW Games recorded a net loss of 12.9 billion won, a staggering increase of 1,223% compared to the previous year (900 million won loss). As a result, NEOWIZ reflected an impairment loss of 38.4 billion won for its subsidiary goodwill on its books.
NEOWIZ posted a net loss of 6.7 billion won last year, entering a deficit, and in particular, the loss amount for the fourth quarter reached 27.3 billion won. This forced NEOWIZ, which had implemented dividends for the first time since going public, to withdraw its dividends just a year later.
The problem is not limited to PAW Games. According to the Financial Supervisory Service's electronic disclosure system, 14 out of the 19 corporations NEOWIZ invested in last year reported consecutive losses. The total estimated loss reached 30.3 billion won. The performance downturn of major investment companies like MOBIRIX and Crey Mind caused continued valuation losses, and NEOWIZ Lab, which was in charge of the K-pop platform, along with its local subsidiary in China, ultimately proceeded to be sold off or liquidated.
◇ "Acquiring based solely on growth potential… management capability under scrutiny"
The market analyzes that there are issues with NEOWIZ's investment strategy. An industry insider noted, "The reason why companies acquired solely based on growth potential are consecutively underperforming is due to a lack of a proper management system after acquisition."
Currently, NEOWIZ's cash flow and financial structure are relatively robust. The company has built a growth engine through the globally successful PC and console title 'Lie of P' last year.
Last year, NEOWIZ reported sales of 367 billion won and operating profit of 33.3 billion won, with operating cash flow also recording a net inflow of 44.7 billion won, maintaining a profit for 13 consecutive years. The debt ratio has also decreased from 27.3% the previous year to 19.5%, ensuring financial soundness.
However, the market is concerned that if NEOWIZ cannot improve investment efficiency in the long term, its financial soundness may also be jeopardized. NEOWIZ stated that it will strengthen support to improve subsidiary performance and achieve results with new titles.
A NEOWIZ official remarked, "In the case of PAW Games, the losses were reflected due to the underperformance of 'Legend of Heroes: Kagaab Trilogy', which launched last year, and the goodwill that was recorded upon acquisition was also impaired for accounting purposes," adding, "This year, with the development of 'Kingdom 2' and the planned release of 'Legend of Heroes' in Taiwan and Japan, we are hopeful for a turnaround."
The official further added, "While it is true that the loss scale for PAW Games was significant, most other investment destinations experienced only minor losses, so it is difficult to view the overall investment performance negatively."