By Gina Lee
Investing.com – Krafton Inc. made a subpar debut on the Korean Stock Exchange on Tuesday. The company’s listing was the first in South Korea where shares failed to rise above the IPO price in a debut since 2020’s uptick in listings.
Krafton shares tumbled 12.75% to KRW434,500 ($378.96) by 1:14 AM ET (5:14 AM GMT), after falling as much as 20% earlier in the session.
An expensive valuation and Chinese regulatory risks contributed to a disappointing debut for the company, which is backed by Tencent Holdings (OTC:TCEHY) Ltd. (HK:0700) and behind the blockbuster PlayerUnknown's Battlegrounds (PUBG) video game.
Krafton said 87% of its first-quarter revenue for 2021 was from Asia ex-South Korea, with a large portion of the 87% likely from sales in China handled by Tencent. The Chinese company saw its shares tumble during the previous week after the Xinhua Agency-affiliated Economic Information Daily labeled online gaming "spiritual opium”.
However, Krafton still managed to raise $3.75 billion through what is currently South Korea's second-largest IPO ever. The placing comes even after regulatory orders forced the company to slash the fundraising target by more than KRW 1 trillion.
Paul Choi, head of Korea Research at CLSA, remained bullish on the company’s long-term potential despite its rocky debut.
"Unlike other internet and gaming companies that are mostly domestic-focused, 95% of Krafton's revenue is generated outside South Korea... so this is a rare, truly global new economy firm.," he told Bloomberg.