Krafton, the maker of PUBG and Battleground Mobile India, is worth $19 billion

Krafton, the maker of PUBG and Battleground Mobile India, is worth $19 billion
(Picture: Battlegrounds Mobile India)

Analysts noted that expensive valuation and China regulation risks could be the reason for the shares to fall. Krafton derives a large portion of its revenue from PUBG.

HIGHLIGHTS

  • Krafton, the South Korean company and maker of PUBG, tumbled as much as 20 percent from its IPO price.
  • 65 percent of the IPO proceeds will go to Krafton, which plans to use the bulk of the funds to acquire other gaming companies.
  • Krafton is valued at about $18.9 billion which is roughly Rs 1,40,580 crores.

Krafton, the South Korean company and maker of popular video game PlayerUnknown’s Battlegrounds (PUBG), tumbled as much as 20 percent from its IPO price on its trading debut on Tuesday. Krafton is the first large South Korean listing whose shares have failed to rise above the initial public offering (IPO) price on debut since a pickup in flotations last year, according to an online report.

The stock was last at Korean Won (KRW) 444,000 which is roughly Rs 28,720 in morning trade, down 11 percent from the IPO price of KRW 498,000 — roughly Rs. 32,220, valuing the company at about $18.9 billion which is roughly Rs 1,40,580 crore.

Krafton derived 87 percent of its revenue from Asia, excluding South Korea, in the January-March quarter, a large portion of which is estimated by analysts to come from sales in China handled by Tencent. “About 70 percent (of sales) appear to be from Tencent. China has already made noises about (Tencent’s) ‘Honor of Kings’. If they also request changes for ‘Peacekeeper Elite’ that would be a negative and could be a very large negative,” Reuters quoted LightStream Research analyst Mio Kato.

The news agency further quoted analysts who said expensive valuation and China regulation risks could be the reason for the shares to fall. Krafton derives a large portion of its revenue from PUBG. Reports also speculate that the video game accounts for nearly 97 per cent of the company’s sales. The company reportedly revised its issue price after regulators in South Korea said that its valuation was very high resulting in a cut of 25 per cent.


“There might be a question mark whether Krafton can well create movies, short films, or animation but we must expand into other various media products because that is what customers want and where the media environments are headed to,” Chang Byung-Gyu, the founder and chairman of Krafton, said at an online press briefing on Tuesday.

Krafton raised $3.75 billion which is roughly Rs 27,890 crores in South Korea’s second-largest IPO after Samsung Life Insurance’s float in 2010, even after the firm cut its fund-raising target by a quarter after regulators ordered it to revise its filings. Some 65 percent of the IPO proceeds will go to Krafton, which plans to use the bulk of the funds to acquire other gaming companies. The remainder went to shareholders cashing out their investments. Krafton CEO Kim Chang Han in an interview had noted that the company plans to use some of its IPO proceeds to hire 100 researchers in that field.