KRAFTON Plans $5B IPO At $24.6B Market Cap
💵 Initial Public Offering
- South Korean gaming holding Krafton has submitted a securities declaration to the Financial Services Commission, and now prepares for the initial public offering on the Korea Exchange Market (KRX) in Jul’21
- The company will offer 10 million shares for purchase (70% new shares and 30% existing) and expects to raise up to $5B (5.6 trillion KRW) at a $24.6B market cap (28 trillion KRW) — this could become the biggest IPO in South Korea since Samsung Life Insurance (032830.KS)
- As a result of the IPO, we expect Krafton to become one of the top-10 gaming companies by market cap in the world, and the biggest gaming company in South Korea
- The indicative share price range is $403.72-490.98 (458,000-557,000 KRW) per share. To confirm the final share price, the company will commit the demand forecasting for investment institutions during the two weeks from June 28th to July 9th. After that, the subscriptions will be made for general investors on July 14th and July 15th. Following the IPO the founder of Krafton, Chang Byung-Gyu, will have a 14% stake in the company, while the leading investor Tencent will hold 13.2% of the shares
- One way the proceeds from the IPO might be used is the expansion of the PUBG franchise to other media, including movies and animated series. At the same time, Krafton will focus on discovering new business areas such as deep learning and artificial intelligence (AI)
💸 Financial Performance
- For 2020, Krafton reported Revenue of $1.47B (+53.6% YoY) and Operating profit of $682m (+115.4% YoY)
- When it comes to Q1’21, Krafton shows a significant YoY decline of the key stats: Revenue decreased by 11.6% reaching $408.2m, while Operating profit dropped by 33% to $201.2m
- The decline could partially be caused by the ban of PUBG mobile in India in Sep’20. The local government was concerned that one of the most popular mobile apps in India could misuse the personal data it had on hand. Recently, Krafton managed to get the app back to the Indian mobile stores by launching new Battlegrounds Mobile India, powered by the local servers
- In Nov’20 the company also announced the plans to invest $100m worth in the local video games, esports, entertainment, and IT industries. Considering that the Korean market generates only 6% ($88.2m) of total Revenue, it is of great significance for Krafton to collaborate with local governments and promote its products abroad.
💸 Krafton’s M&As
- In December 2020, Krafton merged with the publishing and support functions of PUBG Corporation, creating a new division PUBG Studio, which is now focused solely on the development
- Around the same time, Two Krafton’s subsidiaries PNIX and Delusion Studio have consolidated into new mobile developer RisingWings
- In November 2018, following Tencent’s large investment caused by PUBG success, Bluehole created Krafton as a video game holding company and became its subsidiary.
- In June 2018, Bluehole acquired South Korea-based local mobile game developer Delusion Studio for an undisclosed sum
- In March 2018, Bluehole acquired South Korea-based mobile game developer Red Sahara Studio for an undisclosed sum
- Previously, Bluehole had acquired several other companies, including mobile game developer PNIX Games and PC&console focused developer Ginno Games (former PUBG Corporation; PUBG Studio in present)
- Krafton is best known for its multi-platform battle royale franchise PUBG — the mobile version of the game has over 1 billion lifetime downloads, while the PC&console versions have over 75 million copies sold.
- Currently, the company works on Playerunknown’s Battlegrounds: NEW STATE — a new mobile game of the franchise, which has already completed its alpha testing in the United States and is planned to be released this year.
- Furthermore, Krafton develops several new titles, including The Callisto Protocol, Project Windless, and Project Cowboy
Krafton has two other studios under its wing:
Bluehole, a PC-focused developer behind TERA (The Exiled Realm of Arobea), a flagship MMORPG, which was one of the first MMOs to integrate non-targeting combat system
RisingWings, a mobile game developer with several successful products in its portfolio, including golf simulator Golf King and multiplayer bowling game Bowling King