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Lacklustre Public Debut For South Korea's Krafton Of PUBG Fame

Lacklustre Public Debut For South Korea's Krafton Of PUBG Fame
The stock market debut of the maker of the blockbuster video game "PlayerUnknown's Battlegrounds" (PUBG) - Krafton Inc, which is supported by China’s Tencent Holdings, was not as good as expected as the stocks of the company declined by 20 per cent from their price offered at the initial public offering (IPO) on Tuesday.
According to analysts, this lackluster performance of the company was due to an over expensive valuation as well as the regulatory risks in China where the prospects of the gaming company are believed opt be uncertain following the heavy clampdown of Chinese regulators on a number of tech industries and have changed established norms with new regulations and guidelines.
Since floatations picked up last year, this decline in the IPO performance of Krafton marks the first large South Korean company whose stocks have not risen above the IPO prices on debut.
The stock was last at 444,000 won in morning trade, which was 11 per cent lower than the IPO price of 498,000 won, valuing the company at about $18.9 billion.
Despite muted debuts, the public listings of other South Korean companies such as battery material maker SK IE Technology Co Ltd and HYBE, formerly known as Big Hit and the manager of K-Pop group BTS, had closed above their IPO prices on the first day of trading.
In the January-March quarter, about 97 per cent of Krafton’s revenues were generated from Asia, excluding South Korea, and according to analysts, a large proportion of that came from its business in China that is managed by Tencent.
Krafton said in an IPO filing that the fees from a profit distribution scheme for providing technology services for "Peacekeeper Elite" game are the means of the revenues of the company. The "Peacekeeper Elite" game is similar to "PUBG Mobile" and is generally rated among the top two popular games in China.
"About 70% (of sales) appear to be from Tencent," LightStream Research analyst Mio Kato said. "China has already made noises about (Tencent's) 'Honor of Kings' ... If they also request changes for 'Peacekeeper Elite' that would be a negative and could be a very large negative," Kato added.
Following a comment published last week in the Economic Information Daily, an affiliate of the official Xinhua Agency, in which online gaming was described as "spiritual opium”, there was a fall in stock price of Tencent and global gaming companies whose businesses have exposure to the Chinese market such as Activision Blizzard.
Following the comment publication, Tencent was quick to issue a statement in which it said that the company would take action to further reduce access of minors to its flagship video game "Honor of Kings".
Despite the unsuccessful first day performance, Krafton raised $3.75 billion from the IPO - which marked the second largest stock market debut in South Korea – eclipsed only by Samsung Life Insurance's public listing in 2010. Krafton had earlier trimmed its target for raising funds from the IPO following directions from regulators to revise its filings.

Christopher J. Mitchell

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