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

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Kakao Games IPO Bookbuilding: Mood, Book Pricing, & Exit Price Level

Kakao Games IPO: Subscription, Allocation, & Immediate Float

Revise up Kakao G Exit Price: Local Retail Insanity, Hot Money Float, & Valuation Pressure

Kakao Games - Rights Offering Details & IPO Valuation Study

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Equity Capital Markets

Kakao Games is the first of Kakao subsidiaries to go public.It offers 16M new shares (no secondary offering), which represents 27.97% of the SO. 70.49% will go to institutional investors.It has no cornerstone, clawback, or greenshoe.KIS (55%), Samsung (45%), and KB (10%) will be serving as the underwriters with a firm commitment.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/150/490/original/1.png?1596549749" class="editor-image img-responsive" data-smartkarma-image-id="150490"></figure>The book opens on August 26 and runs until the next day. We will find out allocation on August 31, followed by the subscription on September 1. Then, the payment falls on September 4.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/150/491/original/2.png?1596549759" class="editor-image img-responsive" data-smartkarma-image-id="150491"></figure>Pricing?Well, it seems that being humble is a fad in Korea's local IPO market lately. The lower end (₩20,000) is like only one-third of the OTC price.The price band (₩20,000~24,000) gives a market cap of ₩1.52~1.82tril.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/150/492/original/5.png?1596550164" class="editor-image img-responsive" data-smartkarma-image-id="150492"></figure>Then, how did they arrive at ₩20,000~24,000?Well, I'm not too fond of the valuation part. Tencent and Netease are too big. NCsoft is more of a game studio. Netmarble's current valuation? It should be an outlier.Kakao G should be more of a pure-play publisher. The valuation ceiling for a local publisher in Korea is an 18~20x PER. Even factoring in the Kakao platform's distribution power, 35x still carries a lot of premiums (despite the high-flying OTC price).<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/150/493/original/6.png?1596550181" class="editor-image img-responsive" data-smartkarma-image-id="150493"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/150/494/original/7.png?1596550203" class="editor-image img-responsive" data-smartkarma-image-id="150494"></figure>Shareholding-wise, the major shareholder (Kakao) will retain more than half (53.64%) after the IPO with a 6-month lock-up.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/150/507/original/3.png?1596557220" class="editor-image img-responsive" data-smartkarma-image-id="150507"></figure>

Kakao Games is the first of Kakao subsidiaries to go public.It offers 16M new shares (no secondary offering), which represents 27.97% of the SO. 70.49% will go to institutional investors.It has no cornerstone, clawback, or greenshoe.KIS (55%), Samsung (45%), and KB (10%) will be serving as the underwriters with a firm commitment.The book opens on August 26 and runs until the next day. We will find out allocation on August 31, followed by the subscription on September 1. Then, the payment falls on September 4.Pricing?Well, it seems that being humble is a fad in Korea's local IPO market lately. The lower end (₩20,000) is like only one-third of the OTC price.The price band (₩20,000~24,000) gives a market cap of ₩1.52~1.82tril.Then, how did they arrive at ₩20,000~24,000?Well, I'm not too fond of the valuation part. Tencent and Netease are too big. NCsoft is more of a game studio. Netmarble's current valuation? It should be an outlier.Kakao G should be more of a pure-play publisher. The valuation ceiling for a local publisher in Korea is an 18~20x PER. Even factoring in the Kakao platform's distribution power, 35x still carries a lot of premiums (despite the high-flying OTC price).Shareholding-wise, the major shareholder (Kakao) will retain more than half (53.64%) after the IPO with a 6-month lock-up.

Kakao Games

Kakao Games IPO: Terms & Two Key Issues