PUBG maker Krafton’s shares tumble 20% after listing debut, analysts blame ‘expensive valuation’

• Krafton, the developer of battle royale game PUBG, has raised $3.75 billion via an initial public offering (IPO).
  
• However, it made a weak debut on the Korean stock exchange, tumbling 20% before staging a recovery.
  
• Analysts suggest an ‘expensive valuation’ and Chinese regulatory concerns might have played a role in the weak debut.
  

Krafton Inc., the maker of the popular battle royale game PUBG, tumbled 20% after debuting on the Korean Stock Exchange. At the time of writing this story, Krafton’s shares were down by nearly 3%, staging a recovery after the initial shock.

Analysts attributed the decline to an ‘expensive valuation’ and the China regulation risks, stated a Reuters report.

To recall, Krafton’s $3.8 billion initial public offering (IPO) was subscribed 243 times, making it the largest IPO in South Korea since Samsung Life Insurance in 2010.

“There might be a question mark whether Krafton can well create movies, short films or animation but we must expand into other various media products because that is what customers want and where the media environments are headed to,” Chang Byung-Gyu, the founder and chairman of Krafton, said at an online press briefing on Tuesday.

Krafton derives much of its revenue from the battle royale game PlayerUnknown’s Battlegrounds – also known as PUBG. Some reports suggest that the game accounts for nearly 97% of the company’s sales.

It had to revise its issue price after regulators in South Korea said the valuation was too high, resulting in a cut of nearly 25%.

At the current market price (as at 11:15 a.m.) of 434,500 Korean Won (approx. $378), Krafton’s valuation stands at over $20.5 billion.

According to analyst estimates, a large part of Krafton’s revenue is derived from sales in China, handled by Tencent. The crackdown by Chinese regulators could have had an impact on Krafton’s stock market debut.

“China has already made noises about (Tencent's) 'Honor of Kings' ... If they also request changes for 'Peacekeeper Elite' that would be a negative and could be a very large negative,” according to a report by Reuters, quoting LightStream Research analyst Mio Kato.

Krafton recently launched Battlegrounds Mobile India, the Indian version of PUBG Mobile. This comes nearly a year after the Indian government banned PUBG Mobile along with dozens of other Chinese apps and games last year.

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