1 min read.Updated: 10 Aug 2021, 07:46 AM ISTJoyce Lee, Reuters
Gaming companies are facing uncertain prospects in China where regulators have come down hard on a number of industries, upending norms with new guidance and regulations
Shares in Krafton Inc, the Tencent-backed South Korean company behind blockbuster video game "PlayerUnknown's Battlegrounds" (PUBG), fell as much as 20% from their IPO price on their trading debut on Tuesday.
Gaming companies are facing uncertain prospects in China where regulators have come down hard on a number of industries, upending norms with new guidance and regulations.
Krafton was valued at about $18 billion, with shares last trading at 420,500 won in morning trade, down 16% from an initial public offering (IPO) price of 498,000 won.
Krafton derived 87% of its revenue from Asia, excluding South Korea, in the January-March quarter, a large portion of which is estimated by analysts to come from sales in China handled by Tencent.
Krafton receives fees based on a profit distribution scheme from providing "technology services" for "Peacekeeper Elite", a battle royale game similar to "PUBG Mobile" that is developed and serviced by Tencent in the Chinese market, it said in an IPO filing.
Shares in Tencent Holdings as well as global gaming companies with China exposure such as Activision Blizzard tumbled last week after the Economic Information Daily, which is affiliated with the official Xinhua Agency, called online gaming "spiritual opium".
Tencent said it would further curb minors' access to its flagship video game "Honor of Kings", hours after its shares were battered.
Still, Krafton raised $3.75 billion in South Korea's second-largest IPO after Samsung Life Insurance's float in 2010, even after the firm cut its fund-raising target by a quarter after regulators ordered it to revise its filings.
Some 65% of the IPO proceeds will go to Krafton, which plans to use the bulk of the funds to acquire other gaming companies. The remainder of the proceeds went to shareholders cashing out their investments.
More large offerings are in the pipeline in what is shaping up to be a bumper year for South Korean stock market floats, including EV battery maker LG Energy Solution and payments firm Kakao Pay, which is backed by China's Ant Financial.
Kakao Pay's listing plans have been delayed by a regulatory request to resubmit its IPO registration statement.
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