Krafton shares sink as SK Square taps 2.2% block trade

Shares of Krafton Inc., South Korea’s gaming behemoth, lost about 8% on Tuesday on news that SK Square Co., an investment arm of the country’s second-largest conglomerate SK Group, is selling its entire 2.2% stake in a block trade, which would fetch up to 272.5 billion won ($198 million).

After opening 6% lower early in the morning, its shares closed down 8.1% at 238,000 on Tuesday. 

Investors dumped Krafton shares on news that SK Square tapped institutional investors after the market closed on Monday to offload 1.08 million shares or about a 2.24% stake in the video game developer and publisher.

The shares were offered at a price range of 243,000 to 251,000 won with discounts of 3.1 to 6.2% to Monday's closing price, meaning SK Group’s investment unit would cash out up to 272.5 billion won from the block trade, which is being led by Merrill Lynch, JP Morgan and UBS.

SK Square received 1.08 million shares from Krafton in dividends when its internet platform subsidiary SK Planet Co. ended its investment in the gaming company in December 2022. At that time, Krafton’s shares were estimated at 168,000 won apiece.

As the video game developer’s stock rebounded sharply to a new 52-week high of 265,000 won on March 27 from a 52-week low of 145,900 won in early October last year, SK Square is seeking to take profit, worth about 70 billion won, market analysts said.

Investors welcomed SK Square’s move, lifting its shares by 3.6% to end at 82,600 won.

BUMPY ROADS AHEAD FOR SK SQUARE

The block sale of Krafton’s shares comes as SK Square has been reshuffling its investment portfolio by focusing more on semiconductors under its new Chief Executive Officer Park Sung-ha.

SK Square attempted to list its portfolio companies, such as SK Shieldus Co. and One Store Co. but gave up the IPO plans under unfavorable market conditions.

Instead, it sold a controlling stake in SK Shieldus to EQT Partners AB, the world’s third-largest private equity firm, for more than 3 trillion won last year.

It also tried to offload online retail platform 11Street but its negotiations with a potential buyer stalled.

Another asset T Map Mobility Co. due to go public is suffering from big losses, while merger talks between its over-the-top platform company Wavve and local rival TVing have hit a stumbling block.

While many of its core portfolio companies have dipped into the red, SK Square is surviving largely on the proceeds from the sale of SK Shieldus and dividends from SK Hynix Inc.

SK Square needs extra cash to stay afloat.

Meanwhile, Krafton is actively seeking to diversify its business portfolio through major M&A deals and franchises of its global mega-hit PlayerUnknown’s Battlegrounds (PUBG) intellectual property this year to take another great leap, Chang Byung-gyu, chairman of the company’s board of directors, said last month.   

The gaming company is also betting big on the Indian gaming market with the release of localized titles.

Write to Seok-Cheol Choi at dolsoi@hankyung.com


Sookyung Seo edited this article.