The market debut for the company behind “PlayerUnknown’s Battlegrounds” (PUBG), Krafton Inc, falls behind expectation. The company closed its trading debut with a notable fall in its shares.
According to Reuters, shares in Krafton Inc declined as much as 0% on their trading debut on Tuesday.
Shares in Krafton opened with a 9.9% decline from their initial IPO price of 498,000 won. The figure goes lower than what LG Display achieved back in 2004 as LG Philips LCD, data from Refinitiv Eikon shows. Thus, this further marks Krafton’s debut as the lowest in South Korea.
In the end, Krafton closed down with an 8.8% fall from the IPO price. Following its market debut, the company currently values around $19.32 billion.
Douglas Kim, an independent analyst and writer on Smartkarma said, “This was a classic case of the owners being a bit too greedy in their valuation assessment of the company. Although the IPO price range was lowered, it was not lowered enough”.
Still, Krafton managed to rank second in South Korea with its IPO by raising $3.75 billion. Krafton raised such numbers even after a cut in its fund-raising target by a quarter ordered by regulators. On another note, the first rank is still maintained by Samsung Life Insurance in 2010.
Following the market debut on Tuesday, Krafton became the 19th largest stock in the benchmark KOSPI, excluding preferred shares, based on market capitalization.
Accordingly, Krafton will be receiving around 65% of the IPO proceeds. The company plans to allocate the bulk of the funds for other gaming companies acquisitions. Meanwhile, the rest went to shareholders who request their stakes’ cash out.
Krafton and Tencent’s alliance on the market debut
Krafton‘s decline on its debut day is, according to analysts’ speculations, likely due to expensive valuation and China regulation risks.
Excluding South Korea, about 87% of Krafton’s January-March quarter revenue came from Asia. A large portion of it, analysts estimate, come from sales in China handled by Tencent.
“About 70% (of sales) appear to be from Tencent,” Told another publisher on Smarkarma and an analyst from LightStream Research, Mio Kato, to Reuters.
In relation to this, China regulators have been tightening their regulations. This further caused a lot of changes, upending norms with new guidance and rules. A number of industries were affected by the changes, and gaming companies were not exceptions. Thus, the prospects for gaming companies have become hazy.
Read also: Krafton Aims $5 Billion in Its IPO
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