As Facebook floats, GREE and DeNA still down more than 20% following complete gacha ban

Regulatory fight back

As Facebook floats, GREE and DeNA still down more than 20% following complete gacha ban
Japanese social mobile platforms GREE and DeNA are among the most profitable large games companies in the world.

During the first three months of 2012, GREE posted around $560 million in sales and DeNA around $530 million.

Respective operating profit margins were 29 percent and 44 percent, plus GREE has $625 million in cash and DeNA $720 million.

Bump in the road

Things aren't so rosy when it comes to their recent performance on the Japanese stock exchange, however.

GREE (TYO:3632) is down 15 percent, while DeNA (TYO:2432) is down 30 percent over the past 12 months.

One reason is that over the past two weeks, the companies (and others) have come under pressure from Japanese regulators over their virtual goods activity, in terms of selling to minors, and the peculiar Japanese pseudo-gambling process of 'complete gacha'.

Stop, start

To be fair to the companies, both issues are now fully resolved with the imposing fixed limits on IAP for those under 18, and the entire industry stopping 'complete gacha' activity. It's since been banned by the Japanese Consumer Agency.

Yet, combined with other macro economic concerns, neither companies' stock price has recovered.

DeNA's share price had been under pressure for six months, but prior to the current setbacks GREE's shares had been up around 35 percent compared to 12 months ago.

It's certainly a warning to enthusiastic investors currently piling into Facebook's IPO, in terms of the impact of government scrutiny and the downsides of being a company that's always in the public eye.
Contributing Editor

A Pocket Gamer co-founder, Jon is Contributing Editor at which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.