Krafton of South Korea, creator of hit game “PUBG”, tumbles in debut
- Shares fall as much as 20% below IPO price
- Concerns over Chinese crackdown on the gaming industry
- Worst start for the South Korean listing since 2004
SEOUL / HONG KONG, Aug. 10 (Reuters) – Shares of Krafton Inc (259960.KS), the South Korean company backed by Tencent Holdings (0700.HK) behind the hit video game “PlayerUnknown’s Battlegrounds” ( PUBG), fell as much as 20% on their trading debut on Tuesday.
Analysts attributed the fall in shares of South Korea’s second IPO to a costly valuation and Chinese regulatory risks, with gaming companies facing an uncertain outlook after Chinese regulators severely cracked down on a number of industries, upsetting standards with new guidelines and rules.
Krafton shares opened 9.9% lower from their IPO price of 498,000 won, making it South Korea’s lowest trading start since LG Philips LCD, now LG Display, first went public in 2004, according to data from Refinitiv Eikon.
The stock closed 8.8% lower from the IPO price, valuing the company at around $ 19.32 billion.
“This was a classic case where the owners were a little too greedy in their assessment of the valuation of the company. Although the IPO price range was lowered, it did not been lowered enough, ”said Douglas Kim, independent analyst, who posts on Smartkarma.
Krafton achieved 87% of its revenue in Asia excluding South Korea in the January-March quarter, much of which analysts estimate was from sales in China managed by Tencent.
Krafton collects a fee for providing technology services for “Peacekeeper Elite,” a game similar to “PUBG Mobile” that Tencent distributes and which is generally among the two highest-grossing games in China, he said in a filing. ‘Initial Public Offering.
“About 70% (of sales) appear to be from Tencent,” Mio Kato, analyst at LightStream Research, who posts on Smartkarma, told Reuters.
“China has already made noise about ‘honor of kings’ (from Tencent)… If they also ask for changes for ‘Peacekeeper Elite’, that would be a negative point and could be a very big negative.”
Shares of Tencent and global games companies exposed to China such as Activision Blizzard (ATVI.O) fell last week after the Economic Information Daily, which is affiliated with the official Xinhua news agency, qualified the games. online “spiritual opium”. Read more
Tencent was quick to say that it would further reduce minors’ access to its flagship “Honor of Kings” video game.
Still, Krafton raised $ 3.75 billion in South Korea’s second IPO after Samsung Life Insurance float (032830.KS) in 2010, even after the company slashed its target by a quarter. fundraiser after regulators ordered him to revise his documents.
Based on market capitalization, Krafton was the 19th largest KOSPI benchmark share (.KS11) on Tuesday, excluding preferred shares.
Some 65% of the proceeds from the IPO will go to Krafton, which plans to use the bulk of the funds to acquire other gaming companies. The rest went to the shareholders cashing out their investments.
Other bigger deals are in the works in what is shaping up to be a record year for South Korean stock fleets, including electric vehicle battery maker LG Energy Solution and payment firm Kakao Pay, which is backed by Chinese company Ant Financial.
($ 1 = 1,148.9900 earned)
Reporting by Joyce Lee and Scott Murdoch; Additional reporting by Gaurav Dogra and Jihoon Lee; Editing by Edwina Gibbs, Richard Pullin and Ana Nicolaci da Costa
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