Value context and insight. lkm@koreatimes.co.kr
Krafton's IPO price lowered amid overvaluation issue
PlayerUnknown's Battlegrounds artwork and logo
By Lee Kyung-min
By Lee Kyung-min
Krafton, the local developer of the popular game “PlayerUnknown's Battlegrounds,” lowered its corporate valuation for its initial public offering (IPO) to 24.4 trillion won ($21.5 billion), from 28.1 trillion won, following a recommendation by the Financial Supervisory Service (FSS) to revise the firm's securities report to list on the KOSPI.
The price change a day earlier was largely expected since the firm has long been criticized for its overvalued IPO price. Also at play was a precedent set by SD Biosensor, a Suwon-based in vitro diagnostics firm, which lowered its corporate valuation by over 2 trillion won in response to the FSS's revision recommendation.
Some market watchers say Krafton's IPO price was overvalued because of firms it was compared with when assessing corporate value, namely two global content creators ― The Walt Disney Company and Warner Music Group.
The Korean firm claimed it is comparable to Disney because its business involves content creation utilizing intellectual property rights.
But it failed to make a case for its strong intellectual property business potential, leaving many expecting its overvalued share price would only hurt investors.
The revised securities report submitted by Krafton showed it plans to offer 8.65 million shares for its IPO. The price per share will be between 400,000 won and 498,000 won. It plans to draw 4.3 trillion won in investments.
Krafton initially planned to offer around 1.06 million shares at 557,000 won per share, based on the top of the desired band, but the number of shares to be offered will be adjusted due to the lowered valuation.
Krafton's valuation was initially set between 26.2 trillion won and 28.1 trillion won based on its desired band, up to 10 trillion higher than NCSOFT, the local game industry leader with a market capitalization standing at around 18 trillion won. This is why many market watchers criticized Krafton's overvaluation, since the two have reported a similar amount of profit.
It recorded 1.67 trillion won in sales last year, up 53.6 percent, year-on-year. Operating profit and net income were 773.9 billion won and 556.3 billion won, up 115.4 percent and 99.5 percent, respectively.
Krafton's sales in the first quarter of this year were 461 billion won. Over 94 percent of its sales, or 439 billion won, was from overseas.
Some expect that the 4 trillion won to be drawn, coupled with its corporate funds, will brighten the prospects of growth through mergers and acquisitions.
The pre-IPO bidding for Krafton will be postponed to July 14 to 27, from its original dates of June 28 to July 9.