Krafton Cuts Offer Target, Ending Bid for Record Korea IPO

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Krafton Inc. cut its targeted initial public offering by more than a trillion won after concerns over its proposed valuation, dashing the game-maker’s ambitions for the largest-ever debut in South Korea.

The company behind the hit mobile game PlayerUnknown Battlegrounds said it will now sell 8.65 million shares at 400,000 won to 498,000 won, according to a revised filing on Thursday. That would mean that at the top end, the Tencent Holdings Ltd.-backed startup could raise 4.3 trillion won ($3.8 billion), down from an earlier target of 5.6 trillion won, giving it a market capitalization of about 24 trillion won. It expects to go public on Aug. 10.

Krafton had been ordered in June by a local financial watchdog to revise its prospectus due to insufficient or unclear descriptions of unspecified important matters. Despite being almost wholly dependent on its blockbuster PUBG game for earnings, the company had included non-gaming firms such as Walt Disney Co. and Warner Music Group Corp. in its pool of valuation peers, drawing criticism from local media. Both have been removed in its revised filing, along with some other foreign companies.

What Bloomberg Intelligence Says:

Krafton’s enterprise value in its IPO may reach 31.7 trillion won and gives it multiples well above its closest peers, yet could be tough to sustain after its listing. The reliance on a single title -- PlayerUnknown’s Battlegrounds -- and lack of revenue diversity, difficult year-ago comparables and slowing engagement post-pandemic may drag sales growth.

-- Matthew Kanterman and Nathan Naidu, analysts

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PUBG, which has sold more than 75 million copies across PC and console platforms, accounted for 96.7% of Krafton sales in the first quarter of this year, according to the latest prospectus. The company’s investments in other titles such as Elyon have yet to pay off and it acknowledged its dependence on a single game is a risk to its future performance.

The creative studio is building PUBG into a “brand beyond a game” by partnering with other marquee names and developing universe-expanding games, an animated show and a web cartoon. It’s also looking to expand into fields like artificial intelligence, deep learning and entertainment.

Krafton’s IPO could have been the pinnacle for what is shaping up to be a record year of equity floats for South Korean firms. Online retailer Coupang Inc. raised $4.6 billion earlier this year in an IPO on the New York Stock Exchange, the most ever by one of the country’s corporations. More deals are likely to come in the second half, including LG Energy Solution.

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