Shares of Cayenne Entertainment Technology Co (紅心辣椒) yesterday plummeted 6.88 percent to NT$37.20, amid investor concern that the Taiwanese video game company would not be able to collect a US$3 million debt from a shuttered South Korean game developer.
Cayenne in 2013 purchased US$3 million in convertible bonds of MAIET Entertainment Inc, with plans to convert the bonds into a 20 to 30 percent shareholding in the South Korean firm this year.
However, MAIET’s game development and operations failed to keep up with the fast changes in the mobile gaming market, and the firm suffered huge losses, which in turn caused Cayenne to post non-operating losses, the Taiwanese company said in a statement.
The South Korean firm sold all of its game rights to another South Korean game developer, Masangsoft Inc, and shut down operations this year.
In a filing to the Taiwan Stock Exchange on Friday, Cayenne said its board of directors has approved a motion to entrust a South Korean law firm to pursue the US$3 million.
Cayenne’s share price plunged by the 10 percent daily limit to NT$36.30 on opening yesterday morning, before recovering some ground at the close.
Following the sharp decline, Cayenne issued a statement saying that it had recognized the investment losses in the second, third and fourth quarters of last year.
“The investment in MAIET will not affect Cayenne’s operations or profitability this year as the company had recognized all of the losses last year,” the company said.
Cayenne said that if it is able to collect the debt from the South Korean company, it would recognize the payment as non-operating gains.
Despite the investment losses caused by the shuttering of MAIET, Cayenne said it would continue looking for potential investments in video games overseas.
Cayenne said it plans to introduce more international games in Taiwan as well as upgrade its existing games to secure its position in the nation’s gaming market.
Cayenne reported a net loss of NT$238.25 million (US$7.22 million), or a loss per share of NT$8.61, in the first three quarters of this year.
That compares with a net income of NT$37.34 million, or earnings per share of NT$1.44, over the same period last year.
The company’s revenues totaled NT$430.19 million in the first 11 months of this year, dropping 45.14 percent from NT$784.11 million in the same period last year.
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