Kakao Games' largest shareholder has been replaced from Kakao to a special purpose company (SPC) funded by Japan's Line Yahoo. The deal brought in external capital in response to four years of declining results, and it also completed the payment of 300 billion won in new funds.

Kakao Games said in a regulatory filing on June 19 that its largest shareholder changed to LAAA Investment Co., Ltd. (stake of 33.43 percent) after the completion of a third-party allocated capital increase and the execution of a share sale and purchase agreement. LAAA Investment is an investment purpose company established through Petricoje No. 6 Private Equity Investment Partnership, whose largest investor is LY Corp, which operates LINE.

The shares secured by LAAA Investment in the deal total 35,566,086, combining 18,107,732 existing shares bought from Kakao and 17,458,354 new shares acquired through the third-party allocated capital increase. Line Yahoo and related parties, including 10 specially related persons, hold a total of 41,441,235 shares, representing 38.95 percent.

Kakao's shareholding, previously the largest, fell to 15,622,268 shares from 33.73 million shares. Its stake ratio also dropped to 14.68 percent from 37.93 percent, making it the second-largest shareholder. Following the capital increase, Kakao Games' total issued shares rose to 106,391,256 from 88,932,902.

Funds used for the acquisition comprised 410 billion won of its own funds and 78.9 billion won in borrowings raised from Korea Investment & Securities and others. The borrowing period runs from June 19 to June 19, 2029, and the acquired shares will be provided as collateral. The existing shares bought from Kakao are exempt from mandatory holding, but the new shares acquired through the capital increase will be under a one-year lock-up.

Funds raised by Kakao Games through the deal total 300 billion won, including 240 billion won from the capital increase and 60 billion won from private convertible bonds (CB). The funds will be used to secure large-scale new intellectual property (IP) and expand into global markets.

The background to the external capital injection is prolonged weak performance. Without producing a major hit after "Odin: Valhalla Rising" and "Uma Musume Pretty Derby", Kakao Games' revenue fell for four consecutive years, from 1.1477 trillion won in 2022 to 725.8 billion won in 2023, 627.2 billion won in 2024 and 465 billion won in 2025. The company plans to combine resources secured through the investment with Line Yahoo's global network to step up efforts to target overseas markets including Japan, Southeast Asia and North America.

A Kakao Games official said, "Through the new investment, we secured 300 billion won in funds and financial stability." The official added, "We plan to continue strategic investments to strengthen global business competitiveness and secure a foundation for mid- to long-term growth."

Following the governance shake-up, a management reshuffle is also accelerating. Kakao Games will hold an extraordinary shareholders' meeting at 9 a.m. on June 22 at the Kakao AI Campus in Yongin and vote on appointing former Line Games vice president Tae-hwan Kim (김태환) and Kakao Games chief business officer Si-woo Lee (이시우) as inside directors. The two are expected to take up posts as co-chief executives after a board meeting following the shareholders' meeting.