Our story from April about TERA and PUBG developer Krafton going public said that "Analysts peg the firm’s valuation at about 20 trillion South Korean won, or nearly $18 billion USD" -- and that was down from a $27.2 billion estimate in January. After many delays, the initial public offering finally went through yesterday (Tuesday in Korea), and the final total came to ... well, about tree fiddy.
Specifically, the IPO raised $3.8 billion -- still a tidy sum, but clearly far less than the initial estimates. Immediately following the IPO, shares dropped 20% before stabilizing by the end of the day at about half that loss.
The reason for the disappointing numbers? The South China Morning Post attributed it to China's looming crackdown on video games. Krafton is headquartered in Seoul, Korea, but -- as with just about any gaming giant -- does a heavy share of its business in China. About 68.1% of the company's revenue in 2020 came from a single publisher, most likely Tencent.
As one analyst, Mio Kato of LightStream Research, put it, "Now you have an extremely expensive stock running into bad news that China may crack down on gaming." I bet Krafton brass is wishing they hadn't pushed things back as far as they did.
Another analyst, Matthew Kanterman of Bloomberg Intelligence, said the company struggled because of its "higher concentration risk in a single title and weaker near-term growth prospects," which was "always going to make it tough to sustain the valuation post-listing."
And finally, Kiwoom Securities analyst Kim Hak-joon was quoted by Nikkei Asia as mentioning a trio of factors that contributed to the disappointing showing: a too-high valuation, the regulatory issues in China, and too many shares of the company trading in the market.
Despite all those issues, Krafton still made its debut as the #1 game company on the Korea Composite Stock Price Index (KOSPI), ahead of closest competitors NCSoft and Netmarble. Still, executive management is surely going to do whatever it can to please shareholders who expected more, which makes the notion of a free-to-play PUBG all the more likely, in my opinion.
About the Author
Jason Winter is a veteran gaming journalist, he brings a wide range of experience to MMOBomb, including two years with Beckett Media where he served as the editor of the leading gaming magazine Massive Online Gamer. He has also written professionally for several gaming websites.More Stories by Jason Winter
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