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Krafton IPO draws tepid response from institutions IPO estimated to be 250-300 times oversubscribed, lower than recent big deals

Translated by Kim So-in 공개 2021-07-30 08:10:01

이 기사는 2021년 07월 30일 08:07 더벨 유료페이지에 표출된 기사입니다.

South Korean game developer Krafton’s initial public offering (IPO) drew mediocre demand from institutional investors in its recent bookbuilding process.

The IPO of Krafton was estimated to be 250-300 times oversubscribed during its bookbuilding process completed on July 27, according to industry sources. The listing drew positive response from investors considering the second-largest ever deal size of 4.3 trillion won ($3.75 billion) based on the top end of the proposed IPO price range.

But the demand was weaker than other companies’ listings that were carried out earlier this year. In March, SK Bioscience’s listing worth 1.49 trillion won was oversubscribed by 1,275 times and the IPO of SK IE Technology (SKIET) worth 2.25 trillion won was oversubscribed by 1,882 times in May. This was the most competitive IPO ever.

Industry sources noted that the absence of small and medium-sized institutions was one of the reasons for the relatively low competition as institutions had to apply for a five times larger value for Krafton’s shares than other big deals.

Krafton has set a minimum of 1,000 shares to receive shares, which is on par with listing of SKIET and SK Bioscience. However, the value differs because the proposed price band is different for each deal.

The game developer has set the indicative range between 400,000 and 498,000 won. Based on the price range, each institution has to place bids worth 400 million-498 million won to receive shares, with the company likely to set the IPO price at 498,000 won.

This is 4.7 times larger than SKIET’s minimum bid amount of 105 million won and 7.6 times larger than SK Bioscience's 65 million won.

Industry sources said around 300 domestic institutional investors participated in the Krafton’s bookbuilding process, which is significantly less than SKIET's bookbuilding process, in which 1,220 institutions participated.

“Most of the small and medium-sized institutions that usually invested only 100 to 400 million won in one big deal gave up because they don’t have enough buying power,” said an official at an asset management firm.

The absence of small and mid-sized institutions is likely to make large domestic and foreign institutions with long-term perspectives obtain more shares.

Major investors including BlackRock and Singapore sovereign wealth fund GIC have sought to get their hands on Krafton’s shares. They also have agreed to lock-up agreement.

Underwriters plan to allocate more shares to large institutions in consideration of the stock price after listing. “Krafton plans to allocate more shares to overseas institutions, mainly to sovereign wealth funds and long funds, which have long-term perspectives, and to domestic institutions which have agreed to lock-up agreement,” an industry sources said.

This is likely to reduce Krafton’s concern about a stock overhang, which happens when a massive amount of shares are offloaded by shareholders who hold a large stake. (Reporting by Kyung-ju Lee)
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