Kakao's game unit behind Odin valued at $2.7 bn before IPO

Lionheart Studio Corp., the firm behind South Korea’s popular mobile game Odin, is preparing to go public as early as this year, with its enterprise value estimated at up to 3.3 trillion won ($2.7 billion) by its major shareholders.

Last week the unit of Kakao Games Corp. sent requests for proposals to major brokerage companies to select underwriters for its initial public offering, according to people familiar with the matter on April 11.

Lionheart, 51% owned by Kakao Games, will receive their proposals by the end of this week, with an aim to make a trading debut this year.

Last year Lionheart joined the ranks of unicorn startups, or private companies with a corporate value of $1 billion or more, after Odin: Valhalla Rising, a massively multiplayer online role-playing game (MMORPG) took over the top position on app stores shortly after its June 2021 release.

The MMORPG garnered 215.3 billion won in operating profit last year.

Kakao's accounting firm put the value of Kakao's shares in Lionheart at 1.7 trillion won, which implied the latter's value as a whole would stand at 3.3 trillion won.

The gaming arm of the country's dominant chat app increased its stake in Lionheart to 51% last year from 21.6%.

By comparison, WeMade Co., the pioneer of the play-to-earn game in South Korea, holds a 7.2% stake in Lionheart, founded in 2018. It estimated its shares in the startup at 204.5 billion won, estimating Lionheart's value at 2.8 trillion won. 

IPO bankers are bullish on Lionheart, citing Odin's robust sales in Taiwan where its daily revenue has averaged 800 million won since its launch early this year.

Odin, distributed by Kakao Games, has changed the landscape of South Korea’s game industry. Last year it became the country's No.1 game in terms of revenue, overtaking Lineage M by NCSoft Corp., which had topped the list for more than four years.

On the downside, however, the poor performance of Krafton Inc., the developer of the blockbuster battle royale game PlayerUnknown’s Battlegrounds (PUBG) could sour investor sentiment toward the gaming sector.

Krafton raised 4.3 trillion won through a Kospi IPO in August of last year, based on a corporate value of over 20 trillion won.

But since its glitzy debut, Krafton has suffered the biggest fall among the 17 IPOs that took place between March 2021 and February of this year, with more than 500 billion won in market value as of March 21.

Its shares are trading at about half their listing price, after its latest game failed to make a splash.

Adding a cautious note to Lionheart's IPO, Netmarble Neo Inc. withdrew its IPO plan in November of last year due to subdued demand for its shares.

Write to A-Young Yoon at youngmoney@hankyung.com
Yeonhee Kim edited this article