Krafton of South Korea, creator of hit game “PUBG”, tumbles in debut

SEOUL / HONG KONG, Aug. 10 (Reuters) – Shares of Krafton Inc (259960.KS), the South Korean company backed by Tencent Holdings (0700.HK) behind the hit video game “PlayerUnknown’s Battlegrounds” ( PUBG), fell as much as 20% of their IPO price when they debuted on Tuesday.

Analysts blamed the drop on a costly assessment and Chinese regulatory risks, with gaming companies facing an uncertain outlook after Chinese regulators severely cracked down on a number of industries, upsetting standards with high standards. new guidelines and rules.

Krafton is the first major South Korean listing whose shares have not exceeded the initial public offering (IPO) price since the IPO began last year.

The stock was at 444,000 won in morning trading, down 11% from the IPO price of 498,000 won, valuing the company at around $ 18.9 billion.

Ads such as HYBE (352820.KS), formerly known as Big Hit and K-Pop Group Manager BTS, and battery material maker SK IE Technology Co Ltd (SKIET) (361610.KS) have debuted muted, but closed above their IPO price on day one of trading.

Krafton generated 87% of its revenue in Asia, excluding South Korea, in the January-March quarter, much of which analysts estimate was from sales in China managed by Tencent.

Krafton collects fees through a profit distribution program for providing technology services to “Peacekeeper Elite”, a game similar to “PUBG Mobile” which is generally among the two highest grossing games in China, he said. declared in an IPO file.

“About 70% (of sales) appear to come from Tencent,” LightStream Research analyst Mio Kato told Reuters.

“China has already made noise about ‘honor of kings’ (from Tencent)… If they also ask for changes for ‘Peacekeeper Elite’, that would be a negative point and could be a very big negative.”

Shares of Tencent and global games companies exposed to China such as Activision Blizzard (ATVI.O) fell last week after the Economic Information Daily, which is affiliated with the official Xinhua news agency, qualified the games. online “spiritual opium”. Read more

Tencent was quick to say that it would further reduce minors’ access to its flagship “Honor of Kings” video game.

Still, Krafton raised $ 3.75 billion in South Korea’s second IPO after Samsung Life Insurance float (032830.KS) in 2010, even after the company slashed its target by a quarter. fundraiser after regulators ordered him to revise his documents.

Some 65% of the proceeds from the IPO will go to Krafton, which plans to use the bulk of the funds to acquire other gaming companies. The rest went to shareholders cashing out their investments.

Other bigger deals are in the works in what is shaping up to be a record year for South Korean stock fleets, including electric vehicle battery maker LG Energy Solution and payment firm Kakao Pay, which is backed by Chinese company Ant Financial.

($ 1 = 1,148 3100 won)

Reporting by Joyce Lee and Scott Murdoch; Jihoon Lee Additional Reports; Editing by Edwina Gibbs and Richard Pullin

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