This Week in Chancery Court: Subnautica Game Delay Trial, Nikola

A three-day trial begins Nov. 17 in the Delaware Chancery Court where former shareholders of Unknown Worlds Entertainment allege Krafton Inc. and a Tencent-linked Korean studio sabotaged the 2025 release of the Subnautica sequel—firing key employees and delaying the launch to 2026—to avoid up to $250 million in earnout payments. The Delaware court calendar also lists Nov. 19 Supreme Court oral arguments in Buddenhagen v. Clifford over remedies after the unwinding of a disputed shipwreck-recovery merger, Nov. 20 hearings in RTS Holding v. Cano accusing K1 Investment Management of pressuring a company around a $45 million loan, and a Nov. 20 Chancery settlement hearing on a $6.3 million resolution of remaining Nikola derivative claims (including $1.26 million in fees) tied to its SPAC merger and bankruptcy. Together, these matters underscore heightened judicial scrutiny of earnouts, post‑merger control disputes, activist/investor tactics and SPAC-related litigation, with potential financial and governance implications for acquirers, sponsors and institutional investors.

Analysis

A three-day trial begins Nov. 17 in Delaware Chancery Court where former shareholders of Unknown Worlds Entertainment allege Krafton Inc. and a Tencent-linked Korean studio intentionally sabotaged the 2025 release of the Subnautica sequel by firing key employees and delaying launch to 2026 to avoid up to $250 million in earnout payments; the matter will be heard in Wilmington before Vice Chancellor Lori Will. The complaint links operational decisions to an explicit financial motive (avoiding earnouts) rather than mere development delay, which increases the likelihood that any adverse finding could translate into a quantifiable damages award or contract remediation.

The litigation poses direct financial exposure for Krafton (potential earnout liability up to $250 million) and creates near-term revenue and timing risk for a high-profile franchise whose release shift could compress near-term cash flow and investor expectations. The alleged involvement of a Tencent-linked studio adds counterparty and reputational dimensions that could influence partnership dynamics and licensing revenues.

Related Delaware calendar items — Nov. 19 Buddenhagen v. Clifford over post-merger control and stock issuances, Nov. 20 RTS Holding v. Cano concerning alleged investor pressure around a $45 million loan, and a Nov. 20 settlement hearing on a $6.3 million Nikola derivative settlement (including $1.26 million in fees) — underscore heightened Chancery scrutiny of earnouts, post-merger governance and SPAC-era litigation, which can create precedent affecting acquirers, sponsors and lenders across sectors.

Key Decisions for Investors

• Monitor the Nov. 17–19 rulings closely and quantify potential balance-sheet exposure for Krafton from the stated up-to-$250 million earnout claim before initiating or adding to any equity positions
• Consider short-duration hedges or temporary underweight positions for game-publisher peers with revenue tied to single-title release schedules until legal and release-timing uncertainty resolves
• Reassess exposure to companies with Tencent-linked partnerships and to SPAC-era issuers given Delaware’s active docket on earnouts and post-merger governance; build contingency assumptions for legal expenses and delayed revenue
• For credit and lender-focused portfolios, review covenant robustness and downside scenarios for firms facing activist investor pressure or contested lending arrangements like the RTS/K1 matter around a $45 million loan