PlayerUnknown’s Battlegrounds creator files for R69 billion IPO

Krafton Inc., the company behind hit mobile game PlayerUnknown’s Battlegrounds, filed to raise as much as 5.6 trillion won ($5 billion) in a South Korean initial public offering that’s likely to be the country’s largest ever.

The gaming company will sell more than 10 million shares at 458,000 won to 557,000 won apiece, Pangyo-based Krafton said in a filing Wednesday. The top of the range exceeded general market expectations and would grant Krafton a market capitalization of 28 trillion won, based on the number of common shares. Krafton plans to finalize the price July 9 and list on July 22.

Krafton is seeking to smash the record for the biggest debut among South Korean companies, previously held by Coupang Inc., which raised $4.6 billion in an IPO on the New York Stock Exchange in March. The largest listing on domestic exchanges had been Samsung Life Insurance Co.’s $4.3 billion share sale in 2010. Riding a boom in retail trading, Asia’s fourth largest economy is on track for a record year of floats, with more deals from the likes of LG Energy Solution and Kakao’s affiliates likely to come in the second half.

The key question Krafton will have to answer is whether it can grow to become more than a one-hit wonder. The company is almost wholly dependent on its blockbuster, genre-defining PUBG, which produced most of its 1.67 trillion won revenue last year, according to a regulatory filing. Analysts also worry about how much Covid-19 lockdowns helped Krafton’s numbers over the past year — the company’s filing showed sales dropped 11.6% and operating profit was down 33% in the first quarter of this year. Krafton’s prospectus warns that the amount of time and money spent in its games could diminish as the global virus situation improves.

Krafton’s investment in other titles such as Elyon hasn’t yet paid off. Now it’s betting on expanding the PUBG universe with next-generation games, an animated show and a web cartoon, according to Chief Executive Officer Kim Chang-han. This time, it plans to directly publish upcoming games on the global market instead of partnering with third-party publishers, a move that would partly help hedge some geopolitical risks it’s encountered. Krafton took over from Tencent Holdings Ltd. as publisher of PUBG in India last year, where the game had notched up 175 million downloads before it was banned following heightened political tensions with China.

The firm is also looking to expand into fields like artificial intelligence, deep learning and entertainment to broaden its portfolio of growth drivers.

“Krafton has a lot of cash and is raising additional billions through the IPO,” said Choi Jin-sung, analyst at Cape Investment & Securities. “There aren’t many great options in the market to buy a gaming developer. I expect it’s more likely for Krafton to pursue M&As in the entertainment industry.”

Founded by Chang Byung-gyu in 2007, Krafton — formerly known as Bluehole Inc. — released the battle royale game PUBG in 2017. The title has sold more than 75 million copies across PC and console platforms and its mobile version has been downloaded more than a billion times, the company said. It has catalyzed a genre that now also includes other global hits like Epic Games Inc.’s Fortnite and Sea Ltd.’s Free Fire.

After the IPO, founder Chang will hold a 14% stake in Krafton, followed by Tencent with 13.2% held through a subsidiary, the company’s filings show. Krafton hired Mirae Asset Daewoo as lead arranger while Credit Suisse Group AG, Citigroup Inc., JPMorgan Chase & Co. and NH Investment & Securities are co-arrangers.

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PlayerUnknown’s Battlegrounds creator files for R69 billion IPO