Krafton lowers IPO share price amid debate over high valuation

South Korean game developer Krafton Inc. has decided to lower its initial public offering share price amid criticism over its high valuation followed by a request from the financial regulator to correct its registration statement.

Now the industry is paying close attention to if the company will be able to complete a successful IPO with the adjusted share price.

On July 1, Krafton filed a corrected registration statement to the Financial Supervisory Service. Initially, the company's proposed IPO share price stood between 458,000 won and 557,000 won ($492), which has been revised to a range of 400,000 won and 498,000 won. 

The company's market capitalization upon listing is expected to hover between 19.6 trillion won and 24.4 trillion won ($21.5 billion), about 4.5 trillion won lower than the initial estimate of 28.8 trillion won.

Krafton decided to adjust the IPO share price after determining price stability to be more important than pushing for a high valuation, industry watchers say.

Also, the chance that the IPO schedule could be further delayed due to issues over correcting the registration statement may have driven Krafton to revise its IPO share price.

The US Securities and Exchange Commission (SEC) requires companies to complete their IPOs within 135 days of drafting their financial statements, which are included in the registration statements provided to foreign investors.

Referred to as the 135-day rule, Krafton would need to complete its listing procedures by Aug. 12 since it filed its business report on Mar. 31. Or else, the company would need to refile the financial statement from the first half of this year and redo the IPO process, meaning that its listing could be pushed back to September instead of the end of July, as scheduled.

For example, COVID-19 test kit maker SD Biosensor Inc., which is set to go public this month, also lowered its IPO share price by 40% from the initial range of 66,000 won and 85,000 won to a range of 45,000 won and 52,000 won following an FSS notice. 

"The company was probably concerned about delaying the IPO schedule due to the 135-day rule," said a securities industry official.

Market watchers say that companies close to making a trading debut are likely to be walking on eggshells regarding the FSS. Companies wouldn't want to correct their registration statements since it could delay their IPO schedule and put them at risk of having to attract investors when the market conditions aren't favorable.

There have been some concerns over the stock market seeing capital outflow triggered by the increased benchmark interest rate in the fourth quarter. For such reasons, upcoming IPO companies including KakaoBank Corp., Kakao Pay Corp., HK inno.N Corp., Hancom Lifecare Inc. and ViGenCell are pushing to make their trading debuts by August at the latest.

Write to Jin-seong Kim and Ye-jin Jun at jskim1028@hankyung.com
Danbee Lee edited this article.