Special Situation Investing

Monday, February 12, 2007

Webzen (WZEN) - Distribution Agreement

Korean online game developer Webzen (WZEN) has signed an agreement with The9 to distribute it's new release Huxley, in China. WZEN surged over 9% on the news.

The total projected amount of the agreement for Huxleys distribution and service rights is estimated at $35 million. This includes the down payment and a minimum guarantee for a three-year period, while the royalty rate is set at 22% for the duration of the contracted term. The agreement covers the PC version of the game.

To put things into scope, China is only 1 of many markets and the company has several other products in-use and under development. As such I don't know that this is as significant an event as the price change would indicate. Then again, I've believed in Webzen for awhile, having previously purchased shares. What I am hoping, what I have seen in the past, is that the company will continue to get it's new games out and press releases like this will continue to print. However, having seen it 20% lower I see no reason to add to my position and will just hold my existing shares.


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