Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<p>Krafton IPO started trading today. It reached as high as 480,000 won and as low as 405,000 won. Currently, it is trading at 454,000 won, which would be 9% lower than the IPO price of 498,000 won. The current price of Krafton is 0.4% lower than our base case valuation 455,942 won. </p><p>This was the worst first day IPO performance among the major IPOs in Korea with market cap of more than 1 trillion won in 2020 and 2021. Despite the disappointing IPO performance, Krafton is now the 20th largest stock in KOSPI. </p><p>Despite numerous positives of Krafton as one of the most popular game companies in the world, the IPO was disappointing mainly because this was a classic case of the owners being a bit too greedy in their valuation assessment of the company. Although the IPO price range was lowered, it was not lowered enough and many investor saw past this greed and have chosen not to invest in this company. </p><p>All in all, we believe that the valuation of Krafton is likely to drift towards the low-to-mid end of our valuation sensitivity analysis over the next 6 to 12 months, which would suggest implied market cap of 17.3 trillion won to 23 trillion won (344,487 won per share to 455,942 won per share). We continue to have a NEGATIVE view of the Krafton IPO. </p>

Krafton IPO started trading today. It reached as high as 480,000 won and as low as 405,000 won. Currently, it is trading at 454,000 won, which would be 9% lower than the IPO price of 498,000 won. The current price of Krafton is 0.4% lower than our base case valuation 455,942 won. This was the worst first day IPO performance among the major IPOs in Korea with market cap of more than 1 trillion won in 2020 and 2021. Despite the disappointing IPO performance, Krafton is now the 20th largest stock in KOSPI. Despite numerous positives of Krafton as one of the most popular game companies in the world, the IPO was disappointing mainly because this was a classic case of the owners being a bit too greedy in their valuation assessment of the company. Although the IPO price range was lowered, it was not lowered enough and many investor saw past this greed and have chosen not to invest in this company. All in all, we believe that the valuation of Krafton is likely to drift towards the low-to-mid end of our valuation sensitivity analysis over the next 6 to 12 months, which would suggest implied market cap of 17.3 trillion won to 23 trillion won (344,487 won per share to 455,942 won per share). We continue to have a NEGATIVE view of the Krafton IPO. 

Krafton's IPO Trading (Worst 1st Day Performance Among Major IPOs in Korea in the Past 2 Years)

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>Krafton’s IPO is having a rather inauspicious start, opening down almost 10% from its KRW498,000 IPO price and falling as much as 20% at its intraday lows. That they somehow managed to convince some investors to pay up at the high end of the downwardly revised range should be considered a godsend, but with the stock falling so dramatically, should you be chasing this downwards?</p>

Krafton’s IPO is having a rather inauspicious start, opening down almost 10% from its KRW498,000 IPO price and falling as much as 20% at its intraday lows. That they somehow managed to convince some investors to pay up at the high end of the downwardly revised range should be considered a godsend, but with the stock falling so dramatically, should you be chasing this downwards?

Krafton IPO – Should You Chase This Down?

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

<p>Krafton is showing a roller coaster share price this morning on its first trading day.</p><div class="content-highlight"><p><strong>As soon as the trading started, Krafton's stock price fell below ₩403,500, triggering a downward static VI (volatility interruption). And as the stock price rose sharply back to ₩480,000 within 4 minutes of the start of trading, triggering an upward static VI.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/035/original/2.png?1628565638" class="editor-image img-responsive" data-smartkarma-image-id="223035"></figure><p></p></section><p>The starting price was set at ₩448,500, down 9.94% from the offering price of ₩498,000. And today's high was ₩480,00 (-3.61% from the offering price), and the low was ₩400,500 (-19.58%).</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Bank today"}'>Kakao Bank today</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Price"}'>Price</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Market cap"}'>Market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"From the offering price"}'>From the offering price</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering price"}'>Offering price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":498000}' data-sheets-numberformat='[null,4,"[$₩-412]#,##0"]'>₩498,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":24.35123886}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩24.35T</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Opening price"}'>Opening price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":448500}' data-sheets-numberformat='[null,4,"[$₩-412]#,##0"]'>₩448,500</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21.930784395}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩21.93T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.09939759036144578}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">-9.94%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Daily high"}'>Daily high</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":480000}' data-sheets-numberformat='[null,4,"[$₩-412]#,##0"]'>₩480,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":23.4710736}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩23.47T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.03614457831325301}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">-3.61%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Daily low"}'>Daily low</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":400500}' data-sheets-numberformat='[null,4,"[$₩-412]#,##0"]'>₩400,500</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":19.583677035}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩19.58T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.19578313253012047}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">-19.58%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current"}'>Current</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":437500}' data-sheets-numberformat='[null,4,"[$₩-412]#,##0"]'>₩445,500</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21.392905625}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩21.74T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.1214859437751004}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">-12.15%</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

Krafton is showing a roller coaster share price this morning on its first trading day.As soon as the trading started, Krafton's stock price fell below ₩403,500, triggering a downward static VI (volatility interruption). And as the stock price rose sharply back to ₩480,000 within 4 minutes of the start of trading, triggering an upward static VI.The starting price was set at ₩448,500, down 9.94% from the offering price of ₩498,000. And today's high was ₩480,00 (-3.61% from the offering price), and the low was ₩400,500 (-19.58%).








Kakao Bank today
Price
Market cap
From the offering price


Offering price
₩498,000
₩24.35T
-


Opening price
₩448,500
₩21.93T
-9.94%


Daily high
₩480,000
₩23.47T
-3.61%


Daily low
₩400,500
₩19.58T
-19.58%


Current
₩445,500
₩21.74T
-12.15%

Source: KRX



APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<p><a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> raised US$3.8bn at KRW498,000 per share at the top end of its IPO price range in its South Korea IPO. </p><p>Krafton Inc is a video game developer based in South Korea. The company is known for developing the global hit, PlayerUnknown's Battlegrounds (PUBG), an online multiplayer battle royale game. It is backed by Tencent and has also developed other games such as Tera, Elyon, Golf King: World Tour, Mini Golf King, Bowling King, and Archery King.</p><p>In this note, we will talk about the IPO trading dynamics.</p><p>Our previous coverage of the IPO:</p><ul>
<li>
<a href="https://www.smartkarma.com/insights/krafton-ipo-adapting-and-transforming-well" target="_blank" data-smartkarma-citation="insights:54117" rel="noopener">Krafton IPO - Adapting and Transforming Well</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/krafton-ipo-assumptions-and-valuation" target="_blank" data-smartkarma-citation="insights:54469" rel="noopener">Krafton IPO - Assumptions and Valuation</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/krafton-ipo-lock-up-or-lack-thereof-on-most-shares-index-inclusion" target="_blank" data-smartkarma-citation="insights:54477" rel="noopener">Krafton IPO - Lock-Up (Or Lack Thereof on Most Shares) + Index Inclusion</a> </li>
</ul>

 Krafton Inc (259960 KS) raised US$3.8bn at KRW498,000 per share at the top end of its IPO price range in its South Korea IPO. Krafton Inc is a video game developer based in South Korea. The company is known for developing the global hit, PlayerUnknown's Battlegrounds (PUBG), an online multiplayer battle royale game. It is backed by Tencent and has also developed other games such as Tera, Elyon, Golf King: World Tour, Mini Golf King, Bowling King, and Archery King.In this note, we will talk about the IPO trading dynamics.Our previous coverage of the IPO:

Krafton IPO - Adapting and Transforming Well 

Krafton IPO - Assumptions and Valuation 

Krafton IPO - Lock-Up (Or Lack Thereof on Most Shares) + Index Inclusion 


Krafton IPO Trading - Relatively Weaker Demand and Uncertainty Surrounding MSCI Inclusion

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Event-Driven

<div><p>Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO price. </p></div><div>We have covered various aspects of the deal in our previous notes:</div><div><ul>
<li>
<a href="https://www.smartkarma.com/insights/kakao-bank-ipo-riding-on-parent-s-network-but-boundaries-with-kakao-pay-remain-unclear" target="_blank" rel="noopener">Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear</a>, </li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-pricey-as-it-should-be" target="_blank" rel="noopener">Kakao Bank IPO - Pricey as It Should Be</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-lack-of-lock-up-and-msci-ftse-index-implications" target="_blank" rel="noopener">Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications, and</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-trading-one-for-instis-closer-look-at-ftse-and-msci-inclusion-remain-buyers" target="_blank" rel="noopener">Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers</a></li>
</ul></div><div><p>In this note, we will talk about the first day trading and index inclusion.</p></div>

Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO price. We have covered various aspects of the deal in our previous notes:

Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear, 
Kakao Bank IPO - Pricey as It Should Be
Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications, and
Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers
In this note, we will talk about the first day trading and index inclusion.

Kakao Bank - MSCI Done, Missed FTSE by a Whisker.

South Korea

Krafton, Inc. operates as a game development company. The Company develops console games, mobile games, computer games, and other related products. Krafton markets its products throughout South Korea.

Price Gauge
52-week Range	0.00 - 0.00
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Krafton (259960 KS)

Krafton's IPO Trading (Worst 1st Day Performance Among Major IPOs in Korea in the Past 2 Years)

The Krafton IPO was disappointing mainly because this was a classic case of the owners being a bit too greedy in their valuation assessment of the...

Douglas Kim

Krafton IPO – Should You Chase This Down?

Despite the double digit fall vs. its IPO price we feel that risks for Krafton remain skewed to the downside and that it is the most attractive...

Mio Kato

Krafton IPO Trading - Relatively Weaker Demand and Uncertainty Surrounding MSCI Inclusion

Krafton Inc (259960 KS) raised US$3.8bn at KRW498,000 per share at the top end of its IPO price range in its South Korea IPO.

Zhen Zhou, Toh

Kakao Bank - MSCI Done, Missed FTSE by a Whisker.

Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO...

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Krafton's IPO Trading (Worst 1st Day Performance Among Major IPOs in Korea in the Past 2 Years)

The Krafton IPO was disappointing mainly because this was a classic case of the owners being a bit too greedy in their valuation assessment of the...

Douglas Kim

Krafton IPO – Should You Chase This Down?

Despite the double digit fall vs. its IPO price we feel that risks for Krafton remain skewed to the downside and that it is the most attractive...

Mio Kato

Krafton's Share Price Movement Today

This post looks at Krafton's share price movement today, the first trading day, and discusses whether to cut loss at this point or hold the...

Sanghyun Park

Krafton IPO Trading - Relatively Weaker Demand and Uncertainty Surrounding MSCI Inclusion

Krafton Inc (259960 KS) raised US$3.8bn at KRW498,000 per share at the top end of its IPO price range in its South Korea IPO.

Zhen Zhou, Toh

Kakao Bank - MSCI Done, Missed FTSE by a Whisker.

Kakao Bank (KB), South Korea’s largest digital bank, raised US$2.2bn in its South Korean IPO. It ended the first day of trading up 79% from its IPO...

Sumeet Singh