NXC (Nexon holding company) marked 96% loss on their subsidiary cryptocurrency exchange company Korbit in less than 2 years.
According to the audit report released last month, NXC indicated 14.7 billion won in loss in regards to its 62.68% shareholding of Korbit, which went down from 18.5 billion to 3.5 billion. In 2018 it lost 77.8 billion KRW, and in just two years since then, it suffered another 92.5 billion KRW in loss (96% of the initial acquisition value).
Back in 2017, NXC bought 62.22% of Korbit with 96 billion KRW, valuing the company at approximately 160 billion won. Initially, despite the concern that the evaluation was overestimated, it went well. The booming era of cryptocurrency that started around October of 2017 played an important part. As the number of transactions increased, the business for the exchange companies were good and Korbit’s value was estimated even higher than what NXC paid for.
However, things changed since March of 2018, as the overall cryptocurrency market faced a downturn. Korbit was hit hard; Korbit’s revenue from transaction fees were reduced from 75.4 billion KRW to 26.8 billion KRW in just one year. Around that time, the net profit which hovered over 70 billion won went down to 45.7 billion won.
During this time, NXC bought more shares of Korbit (62.22%→62.68%), however, they marked the book value as 18.5 billion won which went down from 96.4 billion won. NXC determined that Korbit’s financial hardship was too much to bear. The actual damage came to 78 billion KRW for NXC.
And it got worse last year. The revenue which was at 27 billion won plummeted to 3.6 billion won, with total loss of 12.8 billion won.
As such, NXC changed the book value of Korbit from 18.5 billion KRW to 3.5 billion KRW (14.9 billion in loss). There was no equity changes. As a result, Korbit’s company value which was at 96 billion won now has decreased by 96% in three years, along with deteriorating management performance and a sharp drop in sales revenue.
The industry is interested in whether Korbit is going to recover from this, considering NXC is now fully endorsing their cryptocurrency and blockchain projects. People are also curious to know if the two parties will collaborate on blockchain business.
NXC announced its interest in cryptocurrency & blockchain market when it bought Korbit in 2017. Since then, it bought another exchange company BitStamp, and established Bitstamp Japan, Bitstamp Luxemburg, Bitstamp USA and Bitstamp Slovenia.
In 2018, NXC changed one of their subsidiary Lasimo to ‘Blockchain Entertainment Lab’ and added ▲Communications sales brokerage, ▲Online Information provision, ▲Technology research and service consignment, ▲System construction, ▲Electronic payment platform agency, and ▲Foreign Exchange Transaction Act’s small overseas remittance law to its business list. In February, it created Arques. Arques is an asset investment and transaction platform that has game-like component to it. NXC states that through Arques, it will ‘support not only traditional stocks, but also virtual assets as well.’
Since Arques is expected to handle all types of assets including virtual assets like cryptocurrencies, the industry foresees that Arques and Korbit will collaborate. However, due to the Special Act that came into act on March, it is unlikely that they will be able to make a new exchange platform at the moment. The Special Act requires the company to qualify for ‘ISMS verification’ and ‘real-name verified withdrawal account,’ which means even if the company gets started right now, it’s bound to take some time.
Meanwhile, Korbit is still one of the four major exchanges in South Korea, and has the real-name verified account from SihnHan Bank. It also has the ISMS qualifications. So if NXC’s two subsidiaries – Korbit and Arques – decide to complement each other’s inadequacy, they can work together well.