Skip to content
  • KOSPI 3254.42 +4.21 +0.13%
  • KOSDAQ 1055.50 +5.25 +0.50%
  • KOSPI200 431.55 +0.17 +0.04%
  • USD/KRW 1151 0.40 0.03%
  • JPY100/KRW 1,044.99 1.69 0.16%
  • EUR/KRW 1,355.13 -1.60 -0.12%
  • CNH/KRW 177.89 0.30 0.17%
View Market Snapshot

IPOs

Krafton mega IPO on horizon: Industry game-changer

Touted as the hottest IPO of the year, the PUBG creator is expected to draw record-high demand

By Jun 15, 2021 (Gmt+09:00)

Krafton mega IPO on horizon: Industry game-changer


Krafton Inc. is set to become the first South Korean decacorn startup, or a company valued at over $10 billion, to make a trading debut on the country’s main bourse, Kospi, with its valuation estimated to reach up to 29.7 trillion won ($26.5 billion).

Touted as the hottest initial public offering of the year, Krafton is expected to take the throne as the country's leading game developer -- overtaking NCSoft Corp., which has held the spot for about two decades.

According to industry sources, Krafton may file a securities report to the Financial Supervisory Service as early as June 16 to formalize its IPO plans. The company is expected to raise between 4.6 trillion won ($4.1 billion) and 5.6 trillion won with a proposed price band of 450,000 won and 550,000 won apiece.

The company plans to conduct bookbuilding for institutional investors early next month, followed by public subscriptions upon finalizing the IPO share price.

The securities industry expects billions of dollars to pour into Krafton's highly anticipated public subscriptions. On the over-the-counter (OTC) market, the company's shares are traded at around 570,000 won apiece -- higher than the expected IPO price band. Also, Krafton is considered to be the last mega IPO to receive multiple subscriptions.

Korean financial authorities have banned multiple subscriptions for IPO shares from retail investors, except for companies that file securities reports before June 20. This puts Krafton on the list of IPO companies eligible for multiple subscriptions, making it all the more likely to drive high demand from retail investors.

For example, battery materials maker SK IE Technology Co. (SKIET) set a new record for IPO demand in April when it attracted a total of 80.9 trillion won in deposits from retail investors who participated in multiple subscriptions across various brokerage firms.

Krafton is expected to experience the same level of success and set a new record with retail investors scrambling to make deposits across multiple brokerage firms. In fact, market watchers expect the company to break the record held by Samsung Life Insurance, which raised around 4.9 trillion won in its 2010 IPO.

There's also much attention placed on how the share price will move following the company's trading debut. SKIET saw its share price double and reach the upper daily limit on its first day of trading, only to plunge shortly after -- demonstrating that even blockbuster IPOs aren't immune from shaky price movements.

14-YEAR-OLD STARTUP TO HIT JACKPOT

Founded in 2007, Krafton rose to stardom in 2017 when it debuted its online multiplayer battle royale game, PlayerUnknown's Battlegrounds (PUBG), which sold over 70 million copies worldwide. The mobile version has been downloaded over 1 billion times since its release in 2018.

The company has come a long way since being unable to pay its employees on time. In 2009, Krafton was battling the death valley curve, in which it was running out of capital without making revenue and on the verge of closing down. Also, the company was engaged in a lawsuit with NCSoft over alleged leakage of trade secrets.

Luckily, Krafton was able to survive by securing 17.1 billion won from venture capital firms.

However, the company faced another roadblock in 2011 when it rolled out a multiplayer online role-playing game (MMORPG) TERA, which had limited commercial success and worsened the company's financial situation.

Krafton turned to aggressive M&As to overcome the crisis. Chang Byung-gyu, the company's founder and chairman, used his own money to acquire small and medium-sized game developers, which led to the development of the global hit, PUBG -- and the rest is history.

The Krafton listing will make Chairman Chang one of the wealthiest people in Korea with his shareholdings estimated to top 3 trillion won in value. He currently holds around 1.4 million shares in Krafton.

The company's executives and early-stage investors are also expected to hit the jackpot. Last month, Chang pledged to give 100 billion won worth of shares to Krafton's some 2,100 employees including new hires that will be joining the company this year. This means that each employee is expected to receive around 30 million won worth of shares.

Early-stage institutional investors of the company are also anticipating hefty gains. Currently, several private equity funds and venture capital firms including IMM Investment, Premier Partners, JKL Partners and Altos Ventures hold some of Krafton's shares.

Last year, Krafton logged revenue of 1.7 trillion won and an operating profit of 773.9 billion won. The company’s growth trend remains strong as it posted 461 billion won in revenue in the first quarter of this year with an operating profit of 227.2 billion won.

Write to Jin-sung Kim and Ye-jin Jun at jskim1028@hankyung.com

Danbee Lee edited this article.

Comment 0

0/300