Krafton IPO draws lukewarm demand from retail investors

Korea’s major game developer Krafton Inc’s much-anticipated IPO subscription has closed by only drawing a muted response from investors. The company also received a lukewarm response from institutional investors last month.

According to the financial industry on Aug. 3, the total amount of deposits for the company’s IPO subscription was 5.04 trillion won ($4.4 billion), much below Kakao Bank’s 58.3 trillion won ($50.8 billion) and HK inno.N’s 29.2 trillion won ($25.4 billion) in July.

Krafton’s IPO shares were oversubscribed by only 7.79 times, in contrast to the social career platform Wantedlab Inc., which aspires to be Korea’s LinkedIn, whose shares were oversubscribed by 1,731 times during the same two-day subscription period. Wantedlab drew 5.5 trillion won ($4.8 billion) in deposits.

Due to the lower-than-expected competition for Krafton’s IPO shares, the subscribers will receive a higher number of shares than the original forecast. Analysts project that a retail investor who put 100 million won ($87,000) for the subscription will likely get 25 Krafton shares.

Krafton will complete the allocation of the IPO shares on Aug. 5 and will be listed on Kospi on Aug. 10. Its market cap immediately after the listing will be 24.35 trillion won ($21.2 billion), surpassing NCSoft Corp. to become the largest game company in the Korean stock market. Krafton will likely be the 16th-largest company on Kospi by surpassing SK Innovation’s market cap of 23.4 trillion won ($20.4 billion) as of Aug. 3.   

The securities industry is keeping a close eye on how Krafton’s stock price will unfold in the days following the listing on Aug. 10. The share prices of the world’s major game companies dropped today after a Chinese state media called Tencent’s popular game an “electronic drug.” Tokyo-listed Nexon Japan saw its share price drop by 6.51%, whereas South Korea’s PearlAbyss Corp. and Kakao Games Corp. saw 6.83% and 3.47% drops, respectively.

On the day of listing, 20,276,708 shares, or about 41.5% of the total shares outstanding, will be available for trading. These shares are valued at more than 10 trillion won ($8.7 billion) at the IPO price of 498,000 won ($433.94). The analysts noted that the number of shares available for trading may be lower if the portion of the locked-up volume among institutional investors is set higher. 

Write to Ye-jin Jun at ace@hankyung.com
Daniel Cho edited this article.