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Startups

Korean unicorn Krafton eyes 2021 IPO to raise over $850 mn

Ye-jin Jun Sep 24, 2020 (Gmt+09:00)

South Korean games developer Krafton Inc., 13.2% owned by Tencent Holdings’ investment arm, is seeking to raise over 1 trillion won ($852 million) in an initial public offering next year, set to be the country’s first unicorn company to list on the main Kospi bourse.

The startup, behind the hit game titles PlayerUnknown’s Battlegrounds (PUBG) and TERA, aims to go public in the first half of 2021, according to investment banking sources on Sept. 24.

Initially it had considered a Nasdaq listing, but turned to the domestic market anticipating that the recent hype surrounding Korean IPOs would attract higher valuation multiples at home, said the sources.

The unicorn, or a private company valued at over $1 billion, recently invited securities companies to an auction to select its IPO underwriters. It will receive their proposals by mid-October.

Krafton is the parent company of game studios PUBG, Bluehole, Pnix, Red Sahara, Delusion, and En Masse Entertainment. Its online multiplayer battle royale game PUBG, which debuted in 2017, was a global hit, further bolstered by the 2018 release of its mobile version.

The company’s earnings nearly quadrupled year on year to 405 billion won in the first half of this year on revenue of 887.2 billion, driven by robust sales of PUBG's Chinese version sold by Tencent.

Its net profit is expected to surge to 1 trillion won this year, compared to last year’s 276 billion won. The upcoming launch of MMORPG Elyon, an online multiplayer role-playing game, should offer an additional share price boost, amid the booming non-contact business in the prolonged pandemic era.

Considering the price-earnings ratio of 30-40 applied to listed Korean game developers, Krafton’s enterprise value is projected to exceed 30 trillion won. Its estimated market value is almost double each that of NCsoft Corp. and Netmarble Corp., both listed on the main bourse.

Krafton’s first-half operating profit came to 513.8 billion won on a consolidated basis, similar to the combined operating profit of NCsoft and Netmarble.

Its planned IPO value may beat SK Biopharmaceuticals Co.’s offering of 959.3 billion won in July and the planned 962.6 billion won IPO by Bit Hit Entertainment Co., home to K-pop sensation BTS. Bit Hit is set to debut on the Korean stock market on Oct. 15 

With continuous money inflow from retail investors into the stock market amid rock-bottom interest rates, Korean companies have been pursuing IPOs.

“The IPO market is at its peak now, raising market expectations that every big company’s IPO must be successful,” one of the investment banking sources. “With COVID-19 spreading again, they are seeking to list before the hype fizzles.”

Mobile banking app KakaoBank Corp. announced a 2021 IPO plan to be Korea’s first online bank to list.

Earlier this month, its affiliate Kakao Games Corp. drew a record 59 trillion won from retail investors in subscription deposits. Its shares were 1,525 times oversubscribed for an IPO of 384 billion won.

Kakao Games shares have been on a downward trend for almost two weeks following their Sept. 10 listing. Still, the company's current market value of 3.8 trillion won is 1 trillion won higher than the previous market estimate.

Vaccine developer SK Bioscience Co. recently hired two Korean securities firms to prepare for the first-half IPO next year. Hanwha General Chemical Co. has also been working on a domestic IPO. Both of their enterprises are valued in the billions of dollars.

LG Energy Solutions, a battery business to be spun off from LG Chem Ltd., is also expected to hit the IPO market next year.

Write to Ye-jin Jun at ace@hankyung.com


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