Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight">Krafton announced after the market close today that it will reduce the IPO price range to 400,000 won to 498,000 won. Previously, the IPO price range was from 458,000 won to 557,000 won. This reduction represents 13% and 11% lower prices than previously (low - high). The reduction in the IPO price range was likely to have caused by a backlash among numerous institutional investors that the IPO price range was too high. </div>The start of the book building for the institutional investors has been delayed to 14 July. The book building process will end on 27 July. The expected listing date of the IPO is scheduled to be on 10 August.

Krafton announced after the market close today that it will reduce the IPO price range to 400,000 won to 498,000 won. Previously, the IPO price range was from 458,000 won to 557,000 won. This reduction represents 13% and 11% lower prices than previously (low - high). The reduction in the IPO price range was likely to have caused by a backlash among numerous institutional investors that the IPO price range was too high. The start of the book building for the institutional investors has been delayed to 14 July. The book building process will end on 27 July. The expected listing date of the IPO is scheduled to be on 10 August. 

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.

The issue of the Financial Supervisory Service's request for correction of Krafton's securities declaration has not subsided.In this regard, local media reports are coming out one after another about the real reason the FSS requested.<h2>Simple omission in the transfer of title?</h2>First, a domestic newspaper published an article two days ago that the reason for the correction request by the Financial Supervisory Service was not the public offering price.According to this newspaper, the Financial Supervisory Service's request to Krafton to revise the securities declaration was found to be due to a simple omission in the transfer of title (the act of entering the name and address in the shareholder register).<a href="https://www.asiae.co.kr/article/2021062910261787865" target="_blank" rel="noopener">Here is the link to the news article By Asia Business Daily</a>The source revealed in the article was not from the Financial Supervisory Service but from the local IB industry. In fact, the Financial Supervisory Service has not yet revealed the reason for the request to revise the Krafton IPO prospectus.Then, there is a possibility that this local IB industry official cited in this article may be from the underwriter side. They may be intending to prevent the FSS's request for amendment from leading to issues of legitimacy of the offering price.

The issue of the Financial Supervisory Service's request for correction of Krafton's securities declaration has not subsided.In this regard, local media reports are coming out one after another about the real reason the FSS requested.Simple omission in the transfer of title?First, a domestic newspaper published an article two days ago that the reason for the correction request by the Financial Supervisory Service was not the public offering price.According to this newspaper, the Financial Supervisory Service's request to Krafton to revise the securities declaration was found to be due to a simple omission in the transfer of title (the act of entering the name and address in the shareholder register).Here is the link to the news article By Asia Business DailyThe source revealed in the article was not from the Financial Supervisory Service but from the local IB industry. In fact, the Financial Supervisory Service has not yet revealed the reason for the request to revise the Krafton IPO prospectus.Then, there is a possibility that this local IB industry official cited in this article may be from the underwriter side. They may be intending to prevent the FSS's request for amendment from leading to issues of legitimacy of the offering price.

FSS's Position on Krafton IPO & The Mood of Foreign Investors Revealed by Mirae Asset

On June 25, Krafton received a request from the Financial Supervisory Service to revise its securities declaration (IPO prospectus).However, it is known that Mirae Asset Securities, the lead underwriter, visited the Financial Supervisory Service on the afternoon of the 24th and discussed the correction of the securities declaration.In other words, it can be seen that Mirae Asset Securities is actively lobbying the Financial Supervisory Service. And it's definitely unusual.Why is Mirae Asset Securities doing this?Mirae Asset Securities is still adhering to the position that it does not plan to change the IPO price of Krafton externally. And I think we can get a hint here.

On June 25, Krafton received a request from the Financial Supervisory Service to revise its securities declaration (IPO prospectus).However, it is known that Mirae Asset Securities, the lead underwriter, visited the Financial Supervisory Service on the afternoon of the 24th and discussed the correction of the securities declaration.In other words, it can be seen that Mirae Asset Securities is actively lobbying the Financial Supervisory Service. And it's definitely unusual.Why is Mirae Asset Securities doing this?Mirae Asset Securities is still adhering to the position that it does not plan to change the IPO price of Krafton externally. And I think we can get a hint here.

Krafton and Mirae Asset Are Playing a Fairly Risky Game

In the end, the Financial Supervisory Service requested Krafton to submit a correction report.The Financial Supervisory Service concluded that Krafton's securities declaration (IPO prospectus) submitted on June 16 through public disclosure could hinder investors' rational investment judgment or cause serious misunderstandings due to unclear material content.As a result, Krafton's current securities declaration is suspended.In addition, Krafton must submit a correction report within three months from the receipt of the request for correction.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/365/original/Screen+Shot+2021-06-25+at+12.22.18+PM.png?1624638338" class="editor-image img-responsive" data-smartkarma-image-id="215365"></figure>Krafton also confirmed through a regulatory filing that it had received a request for correction from the Financial Supervisory Service and said that the reason was the insufficient description of important matters.
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/366/original/Screen+Shot+2021-06-25+at+12.27.56+PM.png?1624638510" class="editor-image img-responsive" data-smartkarma-image-id="215366"></figure></section></section>

In the end, the Financial Supervisory Service requested Krafton to submit a correction report.The Financial Supervisory Service concluded that Krafton's securities declaration (IPO prospectus) submitted on June 16 through public disclosure could hinder investors' rational investment judgment or cause serious misunderstandings due to unclear material content.As a result, Krafton's current securities declaration is suspended.In addition, Krafton must submit a correction report within three months from the receipt of the request for correction.Krafton also confirmed through a regulatory filing that it had received a request for correction from the Financial Supervisory Service and said that the reason was the insufficient description of important matters.


FSS Requested Krafton to Revise the Offering Price: Background & Impact

<div class="content-highlight">
Krafton announced today that it will <a href="https://www.sedaily.com/NewsView/22NRW6IJDV" target="_blank" rel="noopener">delay</a> its IPO process. Originally, the bookbuilding was supposed to start on 28 June. Now it appears that this will be delayed by at least a week. This has negative implications since it suggests that many institutional investors believe the IPO price range may be too high.
Also, delaying the IPO process by a week means that the company will not benefit from the duplicate IPO subscription by the retail investors in Korea, which is likely to reduce the overall demand for the IPO. This is certainly a double whammy. 
</div>


Krafton announced today that it will delay its IPO process. Originally, the bookbuilding was supposed to start on 28 June. Now it appears that this will be delayed by at least a week. This has negative implications since it suggests that many institutional investors believe the IPO price range may be too high.
Also, delaying the IPO process by a week means that the company will not benefit from the duplicate IPO subscription by the retail investors in Korea, which is likely to reduce the overall demand for the IPO. This is certainly a double whammy. 


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.

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Krafton (259960 KS)

Krafton Lowers IPO Price Range

Krafton announced after the market close today that it will reduce the IPO price range to 400,000 won to 498,000 won. Previously, the IPO price...

Douglas Kim

FSS's Position on Krafton IPO & The Mood of Foreign Investors Revealed by Mirae Asset

The FSS indeed pays attention to the offering price, but it doesn't have the authority to request a revision. Meanwhile, Mirae Asset argues that...

Sanghyun Park

Krafton and Mirae Asset Are Playing a Fairly Risky Game

This post identifies what is going on between the Financial Supervisory Service and Mirae Asset regarding the listing of Krafton and what their...

Sanghyun Park

FSS Requested Krafton to Revise the Offering Price: Background & Impact

The Financial Supervisory Service did not clearly state the specific reason. However, many in the market believe that the controversy over the...

Sanghyun Park

Why Is Krafton Delaying Its IPO Process?

Krafton announced today that it will delay its IPO process. This has negative implications since it suggests that many institutional investors...

Douglas Kim

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