Krafton Entering KOSPI, Opening Price Also Below IPO Price

Formed at 448,500 Won, 11% Lower
Subscription Success Fails Amid Overvaluation Controversy
Becomes Market Cap 20.9 Trillion Won Leading Game Stock

[Asia Economy Reporter Song Hwajeong] On the 10th, Krafton, which debuted on the KOSPI, started trading below its IPO price, reflecting continued disappointment over the failure of demand forecasting and general subscription to attract enthusiasm.

As of 9:30 a.m. that day, Krafton was trading at 427,500 KRW, down 21,000 KRW (4.68%) from the opening price. The opening price was set at 448,500 KRW, 11% lower than the IPO price of 498,000 KRW. In the early session, the price fluctuated between a low of 400,500 KRW and a high of 480,000 KRW. The market capitalization reached 20.9039 trillion KRW, surpassing NCSoft (18.0682 trillion KRW) to become the leading game stock.

Krafton, which had been highly anticipated as a major IPO, recorded poor results in demand forecasting and general subscription due to overvaluation concerns. The demand forecasting competition rate was 243.15 to 1, and the general subscription competition rate was 7.8 to 1. Subscription deposits amounted to only 5.0358 trillion KRW. In comparison, SK IE Technology and KakaoBank, also considered major IPOs, attracted subscription deposits of 81 trillion KRW and 58 trillion KRW, respectively.

Krafton is expected to experience greater volatility due to the large number of shares available for circulation after listing. Of the 48,898,070 listed shares, 19,093,426 shares are available for circulation immediately after listing, excluding shares held by major shareholders, institutional investors’ lock-up shares, and employee stock ownership association allocations. The circulating share ratio on the listing day is 39.05%, much higher than KakaoBank (22.6%), SK IE Technology (15.04%), and SK Bioscience (1.63%). On the other hand, the institutional investors’ lock-up commitment ratio is 44.91%, lower than other large IPOs. Kyungbeom Ko, a researcher at Yuanta Securities, analyzed, "The possibility of sell-off on the listing day is expected to be the highest among recent large IPOs, and the foreign investors’ non-commitment share ratio is about 5.6%, nearly twice that of KakaoBank."

Although the desired IPO price was lowered due to overvaluation concerns, the valuation based on the IPO price is still high. Hyunyong Kim, a researcher at Hyundai Motor Securities, said, "Krafton’s IPO price corresponds to a price-to-earnings ratio (PER) of 27 to 30 times based on 2021 earnings per share (EPS), which is a 30 to 40% premium compared to Nexon (20 times) and NCSoft (22 times)." He added, "This valuation level is difficult to maintain in a situation where the company operates a single business in the gaming industry, even considering revenue diversification based on the assumption of the success of the new PUBG: New State game launching in the fourth quarter."

There is a forecast that buying demand may increase if the stock price falls below 400,000 KRW. Researcher Kim said, "Considering the low institutional investors’ lock-up commitment ratio, the poor general subscription rate, and almost no subscription from employee stock ownership, there will be significant pressure from investors feeling valuation burdens to sell shares. However, if the price adjusts to below 400,000 KRW, close to a PER of 20 times, strong new buying demand can also be expected."

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