Kakao Games Enters Stock Market, Soars 160% Above IPO Price

Price Hits Upper Limit as Trading Begins... Investor with 100 Million KRW Gains 192,000 KRW
SK Biopharm Falls Short of 936,000 KRW... High Subscription Competition Causes 'Profit Gap'
About 10 New Releases Including Elion and Odin to Launch in Second Half... Expectations for Performance Improvement

On the 10th, a welcome message was displayed on the electronic billboard in the main lobby of the Korea Exchange to commemorate Kakao Games' listing on KOSDAQ. (Photo by Korea Exchange)

[Asia Economy Reporters Song Hwajeong and Boo Aeri] Kakao Games, which sparked a frenzy in the initial public offering (IPO) market, soared to the upper price limit as soon as trading began on its first day of listing, recording a 'Ttah-sang' (starting at twice the IPO price on the first day of listing and then hitting the upper price limit). It surged 160% compared to the IPO price in an instant.

On the 10th, Kakao Games entered the KOSDAQ market with an opening price set at 48,000 KRW, double the IPO price, and immediately hit the upper price limit as the market opened. Its market capitalization reached 4.568 trillion KRW, ranking 5th in KOSDAQ market cap right after listing, surpassing Celltrion Pharm.

An investor who invested 100 million KRW in Kakao Games' general subscription earned 192,000 KRW on the first day of listing. Investors who put in 100 million KRW during the general subscription were allocated 5 shares. The return on investment was about 0.19%. Another major IPO, SK Biopharm, formed an opening price at 98,000 KRW, twice its IPO price of 49,000 KRW, on its first day of listing in July, and immediately hit the upper price limit, with the stock price rising to 127,000 KRW on the first day. SK Biopharm investors who invested 100 million KRW were allocated 12 shares and earned 936,000 KRW on the first day. The subscription competition rate explains the profit gap between Kakao Games and SK Biopharm. SK Biopharm's IPO subscription competition rate was 323.02 to 1, while Kakao Games' competition rate was an astonishing 1,524.85 to 1.

SK Biopharm recorded 'Ttah-sang-sang-sang' by hitting the upper price limit for three consecutive trading days, including the 'Ttah-sang'. If Kakao Games also achieves 'Ttah-sang-sang-sang', its stock price would rise to 105,400 KRW. The profit per share from 'Ttah-sang-sang-sang' would be 81,400 KRW. An investor who invested 100 million KRW would pocket 407,000 KRW.

Now, the market's attention is on how long the Kakao Games frenzy will continue. SK Biopharm rose for five consecutive trading days, including 'Ttah-sang-sang-sang', before declining. Kakao Games' stock price is also expected to remain strong for the time being. Kim Chang-kwon, a researcher at Mirae Asset Daewoo, said, "For game companies, the early IPO period is an overshooting phase combined with expectations for new releases," explaining, "Netmarble and Pearl Abyss also saw their price-to-earnings ratios (PER) surge to 80 times and 200 times respectively in the early stages of listing because the market reflected expectations for new games prepared for the IPO."

Kakao Games is preparing more than 10 new titles. The first new release to be unveiled is the massively multiplayer online role-playing game (MMORPG) 'Elion'. Scheduled for release within the year, Elion is being developed by Krafton, a domestic game company famous for Battlegrounds. Kakao Games is responsible for publishing in Korea, North America, and Europe. The mobile MMORPG tentatively titled 'Odin: Valhalla Rising' is also in the final stages of development. Kakao Games has also secured a global publishing contract for Nine Ark's mobile RPG tentatively titled 'Soul Artifact'. Additionally, it is preparing several other games, including the fashion coordination simulation game 'Alice Closet' developed by Japanese developer Xenoa, the casual sports game 'Friends Golf' (tentative title) using Kakao Friends intellectual property (IP), and 'All-Star Battle' developed by Friends Games. Kakao Games plans to introduce various new titles through its subsidiaries as well. Its subsidiary XL Games is developing new PC online and mobile games. Life MMO, a subsidiary established jointly with Kakao Mobility, is creating 'ArcheAge Walk', an augmented reality (AR) game using XL Games' 'ArcheAge' IP and Kakao Map.

Researcher Kim said, "Improved earnings are expected in the third and fourth quarters," adding, "Guiding Tales, released domestically and globally in July, is estimated to generate daily new sales of about 700 to 800 million KRW, and in the fourth quarter, new sales from the anticipated release of Elion will be recorded." Mirae Asset Daewoo forecasts Kakao Games' third-quarter sales and operating profit at 141 billion KRW and 24 billion KRW, respectively, and fourth-quarter sales and operating profit at 162 billion KRW and 34 billion KRW, respectively. Kakao Games posted sales of 107 billion KRW and operating profit of 16 billion KRW in the second quarter.

Excessive stock price increases may lead to valuation burdens. Lee Jin-man, a researcher at SK Securities, said, "Kakao Games' pre-listing over-the-counter price was 77,000 KRW, but from a fundamentals and valuation perspective, this reflects an excessively high expectation for short-term gains immediately after listing." He added, "However, due to the domestic and international success of Guiding Tales and the upcoming releases of major new titles like Elion and Odin, earnings improvement is expected in the second half of the year, so valuation burdens are limited."

This content was produced with the assistance of AI translation services.