[News Focus] Behind NCsoft’s stocks plunge lies the power of tradable items

Item trading involving cash exchange is often seen as the culprit behind game-related crimes in South Korea, even causing cases of fraud or physical violence among game players.

The feature is also behind the popularity of, or the gamers’ obsession with, South Korea‘s first-generation massively multiplayer online role-playing PC game “Lineage.”

More recently, item trading has apparently become the deciding factor in the game developer’s stock prices.

Ahead of the release of “Lineage M,” the PC game’s mobile adaption, its developer NCsoft suffered a rout Tuesday at around 2:30 p.m. The plunge by 11.4 percent within an hour of closing came as hearsay began to circulate centering on how “Lineage M” was launching without tradable items. The company eventually suffered in its market capitalization to the tune of 1.01 trillion won ($884.6 million).

NCsoft’s plunge resulted in massive short selling of the stock and sparked allegations of its executive vice president engaging in insider trading.

Traders short sold nearly 314,000 NCsoft stocks worth 112.3 billion won Wednesday, breaking the previous record set the previous day. More than 196,000 NCsoft stocks worth 76.2 billion won were short sold Tuesday, accounting for 17.7 percent of the stock’s daily trading.

“Lineage M” had generated some 5.5 million preorders since April 12, a record high among mobile games, but was met with disappointment by fans on online communities upon the news,

The company at around 3:30 p.m. Tuesday confirmed it would launch a version rated “12,” which does not allow players to trade items. It also unveiled plans to release a different version of “Lineage M” with item trading markets before July 5.

The company’s stocks inched up 1.1 percent Wednesday upon the revised game release plan. But it again fell 4.66 percent Thursday.

NCsoft‘s decision on “Lineage M” came after the 6-month-old “Lineage 2: Revolution,” launched by NCsoft’s archrival Netmarble Games, was re-rated X from 12 on May 10 because of tradable items. Netmarble Games removed the in-game market for trade on June 2 at around 2 a.m. without prior notice to users.

Seeing the online market for tradable items gives rise to players speculating, the state-run game rating board has rated X games featuring item trading markets.

Rating matters to mobile game developers, according to industry sources Thursday.

“If a mobile game is rated X, not only those aged between 12 and 18, but also those using Apple’s App Store would lose access to the game,” an industry source told The Korea Herald. “Our duty is to give access back to the gamers by adjusting game features and going through re-examination by the game rating board.”

On Wednesday, the financial regulators and market operator launched a probe of Tuesday’s massive short selling upon requests.

NCsoft’s Executive Vice President Bae Jae-hyun’s decision to sell 8,000 NCsoft stocks, worth some 3.3 billion won, over two days on June 13 and 15, is drawing speculation he had obtained insider information before selling the stocks.

A source from NCsoft denied allegations Thursday, saying Bae sold the stocks before the decision to release “Lineage M” without the item trading feature was made.

Last month, the Financial Services Commission issued fines worth a combined 2.4 billion won on 14 individuals for using insider information in selling stocks of Hanmi Pharmaceutical in September 2016, but stopped short of busting short sellers during its plunge.

By Son Ji-hyoung (consnow@heraldcorp.com)