Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 25 years of experience in analyzing hundreds of companies, especially in Asia. Deep expertise in the following sectors:
- Technology (E-commerce, SaaS, Internet)
- Consumer 
- Special Situations/Deep Value Plays
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Krafton - Consensus Likely to Reduce Earnings Estimates in 2022

A Comprehensive Review of 27 IPOs in Korea in 2020 and 2021

SK REIT IPO - The Best Ever Book Building Results for a Korean REIT

Krafton: Only 20% of Employee Stock Ownership Association Apply for the IPO Shares

Trading Strategy of Krafton IPO Post Bookbuilding Results

Equity Capital Markets

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 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)