Financial Supervisory Service recommends revision of Krafton IPO price

PlayerUnknown's Battlegrounds' logo

By Lee Kyung-min

Market participants are paying keen attention as to whether Krafton, the local developer of the popular game “PlayerUnknown's Battlegrounds,” will lower its corporate valuation for its initial public offering (IPO), following the recommendation by the Financial Supervisory Service (FSS) to revise the firm's securities report to list on KOSPI.

The financial authority did not mention valuation as a cause for rejecting the report, according to the institutional investors that sought an explanation for the unexpected turn of events.

Yet, the firm long criticized for its overvalued IPO price is likely to lower its valuation, given the precedent set by SD Biosensor. SD Biosensor is a Suwon-based in-vitro diagnostics firm, which postponed its pre-IPO bidding by about a month after lowering its corporate valuation by over 2 trillion won ($1.7 billion), due to the FSS's revision recommendation.

No additional hurdles are expected for the diagnostics firm. Its pre-IPO bidding for institutional investors is scheduled for July 5 to 6.

Krafton's valuation, based on its desired band, was set between 26.2 trillion won and 28.1 trillion won, up to 10 trillion higher than NCSOFT, the local game industry leader with a market capitalization standing at around 18 trillion won. The difference fanned criticism that Krafton sought to overvalue the firm, since the two have reported a similar amount of profit.

The pre-IPO bidding for Krafton will be postponed to the last week of July, from its original dates of June 28 to July 9.

SD Biosensor's desired valuation was between 6.9 trillion won and 8.9 trillion won, and the amount of funds it expected to draw from the IPO was between 1.2 trillion won and 1.3 trillion won.

But following the June 9 recommendation from the FSS, it lowered the desired value by more than 2 trillion won to between 4.6 trillion won and 5.3 trillion won.

It also reduced the amount it expected to draw from the IPO to between 559.8 billion won and 646.9 billion won.

Industry watchers say that the FSS's rejection of the securities report, while not overtly citing the valuation issue in and of itself, is an implicit signal to adjust the price. This kind of implicit signaling is a reason underwriters find themselves in trouble between firms seeking to be listed and the FSS.

Krafton's sales in the first quarter were 461 billion won. Over 94 percent of its sales, or 439 billion won, were from overseas.