Private equity backers of DoubleDown Interactive will likely need more time to exit their investment after the social casino game developer announced it was delaying an initial public offering (IPO) on Nasdaq due to the impact of Covid-19.
DoubleDown Interactive, which is owned by South Korea’s DoubleU Games, said it had withdrawn the Nasdaq application in early July because of adverse market conditions caused by the virus pandemic. It had only filed for the IPO in June.
DoubleU Games bought the company from International Game Technology for $825 million in 2017 and STIC Investments and Opus Private Equity (Opus PE) invested a total of 300 billion won in bonds with warrant and convertible bonds issued by the game maker. This was then equivalent to about a third of the acquisition cost.
In May this year DoubleU Games exercised a call option to purchase bonds with warrants held by STIC at a cost of 113.1 billion won, in preparation for the IPO. This allowed STIC to make a partial exit, generating an interim internal rate of return of 8%. STIC and Opus PE also converted bonds in DoubleDown Interactive to shares in anticipation of the company’s listing.
With the listing being postponed, it is inevitable that STIC and Opus PE will also delay their full exit from DoubleDown Interactive, industry watchers said. As the bonds have already been converted into shares, they no longer have protection for their investment and the exit timing will depend on when the company revives its IPO plans. (Reporting by Se-hun Jo)