[Exclusive] Is Krafton's 'Rejection' Due to 'Cheongdam-dong Stock Tycoon' Lee Hee-jin?

A 'Happening' Caused by Unsettled Name Transfer During Past Off-Market Share Sales
Ongoing Controversy Over IPO Price in the Industry... "Excessive" VS "Appropriate Considering IP Business"

[Asia Economy Reporter Minwoo Lee] The Financial Supervisory Service (FSS) has requested Krafton, the biggest IPO in the second half of the year, to amend its securities registration statement. Although there were claims that the offering price was excessively high, it was actually due to a simple omission in the registration of shareholders' names and addresses.

According to the investment banking (IB) industry on the 29th, Krafton received a request from the FSS to amend its securities registration statement. While some speculated that it was due to a 'bubble in the offering price,' it was confirmed to be a simple omission. In particular, it was found to be related to Mr. Lee, who was once famous as the 'Cheongdam-dong stock millionaire.'

◆The Butterfly Effect of the Cheongdam-dong Stock Millionaire= An IB industry insider familiar with Krafton explained, "Mr. Lee sold shares of Bluehole (now Krafton) to over a hundred people several years ago, but the registration of these transfers was not properly organized, so the FSS requested that this be recorded in the registration statement." Ironically, Mr. Lee, who was sentenced to 3 years and 6 months in prison, fined 10 billion KRW, and ordered to pay about 12.3 billion KRW in confiscation for stock investment fraud charges, caused this incident because he sold good stocks to multiple people.

However, an FSS official said, "We requested the amendment to the securities registration statement after comprehensively considering various factors," and added, "Since the matter is ongoing, it is difficult to disclose detailed information."

Following the FSS's request for an amended registration statement, Mirae Asset Securities, the lead underwriter of Krafton's IPO, plans to adjust the general investor subscription schedule, originally set for mid-July, to late July or early August. July 22 or August 2 are being actively discussed as likely dates.

◆The Overvaluation Controversy Continues= Apart from this incident, the controversy over the high offering price is expected to persist for some time. Krafton recently formalized its IPO by submitting a securities registration statement and set the desired offering price per share at 458,000 to 557,000 KRW. Based on this, the market capitalization is estimated at around 35 trillion KRW. This is double the market cap of NCSoft, the leading domestic game company, which was 18 trillion KRW as of the previous day's closing price. Considering that stock prices usually exceed the offering price after listing, Krafton could instantly enter the top 10 in market capitalization.

The industry continues to argue that this is excessive. Krafton's price-to-earnings ratio (PER) is set to exceed 40 times. Given that the PER of major domestic game companies like NCSoft and Netmarble is around 30 to 35 times, this is considered excessively high. Since there are no other successful titles besides Battlegrounds, it is deemed insufficient to justify the market capitalization. In particular, concerns were raised because royalties from China, a politically sensitive market, account for 90% of profits.

Krafton maintains that it considered expansion potential as a content company. In fact, the desired offering price was set by comparing it not only with major domestic game companies but also with U.S. content companies such as Walt Disney and Warner Music Group. Krafton is actively expanding its IP business. Utilizing the IP of Battlegrounds, it released the short film "Ground Zero" starring actor Ma Dong-seok and also produced a documentary that will serve as the foundation of the Battlegrounds universe. It has secured IPs such as fantasy novels by author Lee Young-do, including "The Bird That Drinks Tears" and "The Bird That Drinks Blood," and is promoting the production of games and secondary creative works. A financial investment industry official said, "The foreign allocation, which accounts for about 55%, has been overbooked more than twice, so Krafton's popularity remains strong," adding, "If it succeeds in the Indian market and the Battlegrounds sequel settles in, the current corporate value can be recognized."

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