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Krafton expects IPO success as big investors show interest

Written by Nikkei Asia Published on     2 mins read

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South Korean game developer downplays overvaluation concerns.

South Korean online game developer Krafton said Monday that it expects success in its initial public offering, as institutional investors are showing strong interest in the company’s listing procedures ahead of its debut on the Seoul stock market next month.

Chief financial officer Bae Dong-geun said that many long-term global investors have expressed trust in the company during two weeks of so-called book building—the settling on an IPO price—which closes on Tuesday. Krafton will confirm the figure on Thursday after consulting with lead manager Mirae Asset Securities.

“Investors recognized us as a leading global creator,” Bae told an online news conference, declaring the book building “successful.”

Chang Byung-gyu, the company’s founder and chairman, cited a foreign investor as saying that it is considering investing in the benchmark Kospi index for the first time due to Krafton, which is well-known for its battle royale game PlayerUnknown’s Battlegrounds, or PUBG.

The confidence expressed by the executives comes as Krafton was forced to cut its IPO price target by more than 10% earlier this month after South Korea’s financial regulator demanded the company correct its prospectus, which it deemed overvalued.

Krafton responded by suggesting a revised band between KRW 400,000 (USD 350) and KRW 498,000, aiming to raise up to KRW 4.3 trillion, the second-largest IPO on the benchmark Kospi. Its initial target would have made it South Korea’s biggest-ever IPO.

Bae, the CFO, said he understands the worries over overvaluation, but argued that Krafton has significant growth potential. The company initially based its valuation on that of global peers such as The Walt Disney Co. and Activision Blizzard, but following the determination by the regulator, changed its peer list to four local game developers.

“I know that there are some concerns, but some people say that we are undervalued,” said Bae. “I am proud [of the company] as CFO. In the long term, we still have big potential.”

CEO Kim Chang-han said that Krafton will expand the scope of its PUBG-related intellectual property to various media, such as a movie, a documentary, a web cartoon, and anime, establishing what he described as a “universe based on the game.”

Krafton said it will use 70% of the IPO proceeds for mergers and acquisitions in the global market, as the company has been communicating with game studios around the world for the last two years. The company will also hire new developers and staff, including 700 employees this year.

This article first appeared on Nikkei Asia. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei.

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