Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

<p>In the end, the Financial Supervisory Service requested Krafton to submit a correction report.</p><p>The Financial Supervisory Service concluded that Krafton's securities declaration (IPO prospectus) submitted on June 16 through public disclosure could hinder investors' rational investment judgment or cause serious misunderstandings due to unclear material content.</p><p><strong>As a result, Krafton's current securities declaration is suspended.</strong></p><p><strong>In addition, Krafton must submit a correction report within three months from the receipt of the request for correction.</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/365/original/Screen+Shot+2021-06-25+at+12.22.18+PM.png?1624638338" class="editor-image img-responsive" data-smartkarma-image-id="215365"></figure><p>Krafton also confirmed through a regulatory filing that it had received a request for correction from the Financial Supervisory Service and said that <strong>the reason was the insufficient description of important matters</strong>.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/366/original/Screen+Shot+2021-06-25+at+12.27.56+PM.png?1624638510" class="editor-image img-responsive" data-smartkarma-image-id="215366"></figure></section></section>

In the end, the Financial Supervisory Service requested Krafton to submit a correction report.The Financial Supervisory Service concluded that Krafton's securities declaration (IPO prospectus) submitted on June 16 through public disclosure could hinder investors' rational investment judgment or cause serious misunderstandings due to unclear material content.As a result, Krafton's current securities declaration is suspended.In addition, Krafton must submit a correction report within three months from the receipt of the request for correction.Krafton also confirmed through a regulatory filing that it had received a request for correction from the Financial Supervisory Service and said that the reason was the insufficient description of important matters.


FSS Requested Krafton to Revise the Offering Price: Background & Impact

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p>Krafton announced today that it will <a href="https://www.sedaily.com/NewsView/22NRW6IJDV" target="_blank" rel="noopener">delay</a> its IPO process. Originally, the bookbuilding was supposed to start on 28 June. Now it appears that this will be delayed by at least a week. This has negative implications since it suggests that many institutional investors believe the IPO price range may be too high.</p>
<p>Also, delaying the IPO process by a week means that the company will not benefit from the duplicate IPO subscription by the retail investors in Korea, which is likely to reduce the overall demand for the IPO. This is certainly a double whammy. </p>
</div>


Krafton announced today that it will delay its IPO process. Originally, the bookbuilding was supposed to start on 28 June. Now it appears that this will be delayed by at least a week. This has negative implications since it suggests that many institutional investors believe the IPO price range may be too high.
Also, delaying the IPO process by a week means that the company will not benefit from the duplicate IPO subscription by the retail investors in Korea, which is likely to reduce the overall demand for the IPO. This is certainly a double whammy. 


<p>The Financial Supervisory Service (FSS) revised the securities declaration form (the IPO prospectus) and the securities issuance performance report so that institutional investors' voluntary lockup commitments can be made known to the market in more detail.</p><h2>As-Is</h2><p>To induce long-term investment in IPO stocks, the FSS operates a system that preferentially allocates IPO stocks to institutional investors who have pledged to hold them for a certain period of time after listing.</p><p>However, only the total voluntary lockup of all institutional investors is disclosed in the securities declaration form and the issuance performance report. <span>As a result, it is impossible to check the status of institutional lockup obligations by institutional type.</span></p><h2>To-Be</h2><p>The details of participation in the bookbuilding for each lockup commitment period should be classified by the following 6 institutional investor types in the securities declaration form (including the correction report). Also, i<span>n the securities issuance report, the allocation details of institutional investors shall be described in detail in the same way.</span></p><ol>
<li><strong>Public offering fund (publicly raised funds)</strong></li>
<li><strong>Brokerages</strong></li>
<li><strong>Pensions, funds managing proprietary assets, banks, and insurance companies</strong></li>
<li><strong>Local other: discretionary investment companies, savings banks, real estate trust companies, capital companies, and leasing companies</strong></li>
<li><p><strong>Foreign institutional investors (with transaction record): foreign institutional investors who have a business relationship with the underwriter or of whom the underwriter acquirer is aware of the identity</strong></p></li>
<li><p><strong>Foreign institutional investors (without transaction record)</strong></p></li>
</ol>

The Financial Supervisory Service (FSS) revised the securities declaration form (the IPO prospectus) and the securities issuance performance report so that institutional investors' voluntary lockup commitments can be made known to the market in more detail.As-IsTo induce long-term investment in IPO stocks, the FSS operates a system that preferentially allocates IPO stocks to institutional investors who have pledged to hold them for a certain period of time after listing.However, only the total voluntary lockup of all institutional investors is disclosed in the securities declaration form and the issuance performance report. As a result, it is impossible to check the status of institutional lockup obligations by institutional type.To-BeThe details of participation in the bookbuilding for each lockup commitment period should be classified by the following 6 institutional investor types in the securities declaration form (including the correction report). Also, in the securities issuance report, the allocation details of institutional investors shall be described in detail in the same way.
Public offering fund (publicly raised funds)
Brokerages
Pensions, funds managing proprietary assets, banks, and insurance companies
Local other: discretionary investment companies, savings banks, real estate trust companies, capital companies, and leasing companies
Foreign institutional investors (with transaction record): foreign institutional investors who have a business relationship with the underwriter or of whom the underwriter acquirer is aware of the identity
Foreign institutional investors (without transaction record)


Korea IPO Lockup Allocation Disclosure Rule Change: Starting with SD Biosensor & Krafton

<div><p>The Financial Supervisory Service (FSS) reviews an IPO prospectus for 15 days. Only after approval by The FSS will Krafton be able to market to investors.</p></div><div>
<p>The Financial Supervisory Service may request amendments to an IPO prospectus if it determines that any part of the disclosure may interfere with the good judgment of investors or may cause serious misunderstanding.</p>
<p>Similar to the case of SD Biosensor recently, in Krafton's case, market dissatisfaction with the overly high price is intensifying. So, the FSS may ask Krafton to revise its offering price.</p>
<p>At the same time, another issue is emerging. Again, this could lead to the FSS requesting amendments to the IPO prospectus.</p>
<p><strong>The issue is that Krafton has so far denied the business structure in which Tencent provides PUBG (PlayerUnknown's Battlegrounds) in the name of Peacekeeper Elite (和平精英) in the Chinese market and Krafton receives a portion of its sales as royalties.</strong></p>
<p><strong>However, Krafton recognized for the first time a royalty income relationship with Tencent through this IPO prospectus. In this regard, the FSS is examining whether the IPO prospectus has sufficiently explained the business risks that such a business relationship would bring and, furthermore, whether such a change of word has any legal problems.</strong></p>
</div>

The Financial Supervisory Service (FSS) reviews an IPO prospectus for 15 days. Only after approval by The FSS will Krafton be able to market to investors.
The Financial Supervisory Service may request amendments to an IPO prospectus if it determines that any part of the disclosure may interfere with the good judgment of investors or may cause serious misunderstanding.
Similar to the case of SD Biosensor recently, in Krafton's case, market dissatisfaction with the overly high price is intensifying. So, the FSS may ask Krafton to revise its offering price.
At the same time, another issue is emerging. Again, this could lead to the FSS requesting amendments to the IPO prospectus.
The issue is that Krafton has so far denied the business structure in which Tencent provides PUBG (PlayerUnknown's Battlegrounds) in the name of Peacekeeper Elite (和平精英) in the Chinese market and Krafton receives a portion of its sales as royalties.
However, Krafton recognized for the first time a royalty income relationship with Tencent through this IPO prospectus. In this regard, the FSS is examining whether the IPO prospectus has sufficiently explained the business risks that such a business relationship would bring and, furthermore, whether such a change of word has any legal problems.


Krafton's Biggest Lie About Tencent Relationship & Regulation Risk in China

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>Krafton is a game developer sporting multiple studios developing games for a variety of genres and devices, but is heavily dependent on PUBG Mobile. We see numerous risks on the horizon and detail these below. Douglas Kim and Sanghyun Park have provided significant detail on various aspects of the IPO in the following insights:</p><ol><li><a href="https://www.smartkarma.com/insights/krafton-ipo-preview" target="_blank" rel="noopener">Krafton IPO Preview | Smartkarma</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/krafton-ipo-9-major-risks" target="_blank" rel="noopener">Krafton IPO - 9 Major Risks | Smartkarma</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/initial-thoughts-on-the-krafton-ipo-valuation" target="_blank" rel="noopener">Initial Thoughts on the Krafton IPO Valuation | Smartkarma</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/new-games-launches-by-krafton-its-major-competitors-in-2021" target="_blank" rel="noopener">New Games Launches by Krafton &amp; Its Major Competitors in ... (smartkarma.com)</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/krafton-ipo-offering-detail-valuation-issue-index-fast-entry" target="_blank" rel="noopener">Krafton IPO: Offering Detail, Valuation Issue, &amp; Index F ... (smartkarma.com)</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/several-controversial-issues-about-krafton-ipo-valuation" target="_blank" rel="noopener">Several Controversial Issues About Krafton IPO Valuation (smartkarma.com)</a></li></ol><ol><li><a href="https://www.smartkarma.com/insights/krafton-s-strategic-intention-behind-high-offering-price-fss-correction-request-possibility" target="_blank" rel="noopener">Krafton's Strategic Intention Behind High Offering Price ... (smartkarma.com)</a></li></ol>

Krafton is a game developer sporting multiple studios developing games for a variety of genres and devices, but is heavily dependent on PUBG Mobile. We see numerous risks on the horizon and detail these below. Douglas Kim and Sanghyun Park have provided significant detail on various aspects of the IPO in the following insights:Krafton IPO Preview | SmartkarmaKrafton IPO - 9 Major Risks | SmartkarmaInitial Thoughts on the Krafton IPO Valuation | SmartkarmaNew Games Launches by Krafton &amp; Its Major Competitors in ... (smartkarma.com)Krafton IPO: Offering Detail, Valuation Issue, &amp; Index F ... (smartkarma.com)Several Controversial Issues About Krafton IPO Valuation (smartkarma.com)Krafton's Strategic Intention Behind High Offering Price ... (smartkarma.com)

Krafton IPO – The Past Present and Future of PUBG

South Korea

Krafton, Inc. operates as a game development company. The Company develops console games, mobile games, computer games, and other related products. Krafton markets its products throughout South Korea.

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Krafton (259960 KS)

FSS Requested Krafton to Revise the Offering Price: Background & Impact

The Financial Supervisory Service did not clearly state the specific reason. However, many in the market believe that the controversy over the...

Sanghyun Park

Why Is Krafton Delaying Its IPO Process?

Krafton announced today that it will delay its IPO process. This has negative implications since it suggests that many institutional investors...

Douglas Kim

Korea IPO Lockup Allocation Disclosure Rule Change: Starting with SD Biosensor & Krafton

The Financial Supervisory Service revised the IPO prospectus form and the securities issuance performance report so that institutional lockup data...

Sanghyun Park

Krafton's Biggest Lie About Tencent Relationship & Regulation Risk in China

Krafton officially recognized the relationship with Tencent's Peacekeeper Elite through this IPO prospectus. Now, we need to consider what...

Sanghyun Park

Krafton IPO – The Past Present and Future of PUBG

Krafton is heavily dependent on PUBG Mobile and we see numerous risks on the horizon to this key title due to prior tailwinds turning into headwinds.

Mio Kato

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