Kakao Games Corp., a unit of South Korea’s top mobile messaging app operator, is seeking to raise up to 384 billion won ($323 million) from an initial public offering in Seoul next month, riding on the non-contact business boom in the stay-at-home environment.
The platform of the famous game title PlayerUnknown’s Battlegrounds (PUBG) plans to offer its new shares at 20,000 to 24,000 won apiece, according to its regulatory filing submitted on August 3. The price band is about one third of its price quoted on the over-the-counter market.
The prospective IPO is the first in a series of Kakao Corp.’s subsidiaries in the pipeline of IPOs on the domestic stock markets and expected to be the hottest offering on the junior Kosdaq market this year.
China’s tech giant Tencent Holdings Ltd. owns 5.6% of Kakao Games after it invested 50 billion won in the game streaming platform in February 2018. At the upper end of the proposed price band, its stake is worth 98 billion won.
Korea’s leading game developer Netmarble Corp. holds another 5.6% of the game platform. The PUBG developer Krafton Inc, which is also planning to go public this year, has an undisclosed minority stake.
The three shareholders, which Kakao Games describes as strategic investors, are not selling their shares in the IPO.
For the public offering, Kakao Games will issue 16 million shares, or 21.9% of its outstanding shares, for both institutional and individual investors. Currently, its parent company Kakao Corp. owns 59%.
Based on the proposed IPO price, its enterprise value is projected at 1.76 trillion won. It plans to use the proceeds to beef up contents and finance M&As.
ROOM FOR FURTHER GROWTH
The offering price, one third of the OTC market price, may suggest more room for the new shares to rise after its stock market debut.
“The proposed IPO price band seems to reflect concerns that languid trade of Kakao Games shares after a stock market listing could dampen investor sentiment towards other Kakao subsidiaries waiting for IPOs,” an investment banking source told the Korean Investors.
Its affiliates Kakao Page Corp., Kakao Commerce Corp. and Kakao Bank are preparing for IPOs. Kakao Page offers digital contents such as webtoons, novels and movies; Kakao Commerce is a mobile shopping operator; and Kakao Bank is a mobile app banking service provider.
In 2018, Kakao Games received approval of listing on the Kosdaq. But it withdrew the IPO, running into a regulatory hurdle and chilled interest in PUBG after the hacking attack on the mobile game.
The platform giant revisited the IPO plan this year, underpinned by buoyant stock markets with continuous inflows of retail money. Its net profits soared by nearly three times in the first half of the year as the pandemic has not been slowing down.
It also released the new mobile game of Guardian Tales last month. It ranked fifth on the Google Play Store in sales a half month after its launch.
“Our company’s game industry is a typical untact business and becoming more important in the current pandemic environment,” Kakao Games said in the regulatory filing. “If such an untact culture persists, the game industry will continue to grow.”
Untact is a term coined by combining ‘un’ with ‘contact’, referring to a non-contact or non-face to face operation.
The annual growth in the global game industry averaged 13.23% between 2016 and 2018. Mobile game services increased 14.1% on average over the past three years, outpacing the 3.7% growth in computer-based games.
Kakao Games earned 27.8 billion won in net profits on revenues of 203 billion won in the first half of this year, up 264% and 8.2% year on year respectively.
The game streaming platform will make a trading debut on the Kosdaq around mid-September after fixing its IPO price during the book building process for institutional investors on August 26 and 27.
Korea Investment & Securities and Samsung Securities are handling the IPO.
By Woo-sang Lee
<Edited by Yeonhee Kim>