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

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.<h2>As-Is</h2>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.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.<h2>To-Be</h2>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, in the securities issuance report, the allocation details of institutional investors shall be described in detail in the same way.<ol>
<li>Public offering fund (publicly raised funds)</li>
<li>Brokerages</li>
<li>Pensions, funds managing proprietary assets, banks, and insurance companies</li>
<li>Local other: discretionary investment companies, savings banks, real estate trust companies, capital companies, and leasing companies</li>
<li>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</li>
<li>Foreign institutional investors (without transaction record)</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>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.</div><div>
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.
</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.

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:<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

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">In July 2021, the Krafton and SD Biosensor are expected to complete their IPOs. We expect both of these two IPOs to be duds. The more we think about this, it appears that if indeed Krafton and SD Biosensor IPOs end up doing really poorly, this could upset the entire IPO market and change the investment sentiment for Korean IPOs which has been sizzling hot in the past 15 months.</div>In this insight, we also discuss some of the major new game launches by Krafton and its major competitors in the rest of 2021. <ul>
<li>
Krafton - <a href="https://www.livemint.com/companies/news/kraftons-battlegrounds-mobile-india-receives-over-5-mn-downloads-in-two-days-11624182233199.html" target="_blank" rel="noopener">Battlegrounds Mobile India</a> (BGMI), Battleground: New State, The Callisto Protocol</li>
<li>
Netmarble - Second Country</li>
<li>
Kakao Games - ODIN: Valhalla Rising</li>
<li>
NCsoft - Blade &amp; Soul 2, Project TL (The Lineage), Aion 2</li>
</ul>

In July 2021, the Krafton and SD Biosensor are expected to complete their IPOs. We expect both of these two IPOs to be duds. The more we think about this, it appears that if indeed Krafton and SD Biosensor IPOs end up doing really poorly, this could upset the entire IPO market and change the investment sentiment for Korean IPOs which has been sizzling hot in the past 15 months.In this insight, we also discuss some of the major new game launches by Krafton and its major competitors in the rest of 2021. 

Krafton - Battlegrounds Mobile India (BGMI), Battleground: New State, The Callisto Protocol

Netmarble - Second Country

Kakao Games - ODIN: Valhalla Rising

NCsoft - Blade &amp; Soul 2, Project TL (The Lineage), Aion 2
 

New Games Launches by Krafton & Its Major Competitors in 2021

Index Rebalance

What is the KRX BBIG K-New Deal Index?The KRX BBIG K-New Deal Index consists of 12 stocks, each of which is a representative company in four industries, including rechargeable Batteries, Bio, Internet, and Games, which are the leading industries in the Korean stock market.It is important to note that this is a mother index, under which there are four sub-indices, like one for each sector. Each sub-index has ten constituents selected based on market capitalization.Index weight &amp; number of constituentsThe mother index is an equal-weighted index, in which each index constituent is allocated the same weight at each balancing, 1/12 = 8.33%.But the four sub-indices employ a hybrid weight system. The top-three group is given the weight of 75%, in which each stock is allocated the same weight of 25% at each rebalancing. In comparison, the plus group consisting of the remaining seven constituents is given the remaining weight of 25%, in which their float-adjusted market capitalization weights the seven stocks.Screening criteria, period, base date, &amp; implementation dateScreening for index inclusion is based on the average daily market capitalization and the average daily trading value of an eligible company over the screening period. Companies are screened over the three months preceding the screening base date.Regular rebalancings are made at the end of February and August every year. This year, February 26 and August 31 are the implementation dates of the regular rebalancing.Therefore, the screening base date is January 29 and July 30, which are the last days of the previous month.
Screening details

Criteria
Average daily market capitalization


Period
3 months preceding the screening base date


Base date

Last trading day of January and July
: January 29 and July 30 



Implementation date

Last trading day of February and August
: February 26 &amp; August 31 


Source: KRX
Current constituents &amp; index weights, as of June 18, 2021Below is the index weight of the constituent stocks of each index based on last Friday's closing price. The index weight reset on February 26 changed in proportion to the share price increase (or decrease).









KRX BBIG K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


LG Chem Ltd
051910
7.58%
₩58,026.9B
₩254.2B


Samsung SDI Co Ltd
006400
7.86%
₩46,347.3B
₩181.5B


SK Innovation Co Ltd
096770
8.42%
₩25,613.0B
₩228.0B


Samsung Biologics Co Ltd
207940
8.85%
₩55,313.9B
₩196.2B


Celltrion, Inc.
068270
7.19%
₩33,625.7B
₩164.3B


SK Biopharmaceuticals Co Ltd
326030
8.30%
₩9,984.9B
₩41.1B


Kakao Corp
035720
13.13%
₩68,809.1B
₩405.9B


Naver Corp
035420
8.53%
₩65,376.8B
₩245.8B


Duzon Bizon Co Ltd
012510
6.38%
₩2,530.4B
₩17.5B


NCSoft Corp
036570
7.02%
₩17,958.4B
₩74.0B


Netmarble Corp
251270
8.49%
₩11,560.7B
₩46.2B


Kakao Games Corp
293490
8.44%
₩4,305.6B
₩30.4B

Source: KRX











KRX Secondary Battery K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


LG Chem Ltd
051910
23.22%
₩58,026.9B
₩254.2B


Samsung SDI Co Ltd
006400
24.07%
₩46,347.3B
₩181.5B


SK Innovation Co Ltd
096770
25.79%
₩25,613.0B
₩228.0B


Posco Chemical Co Ltd
003670
7.83%
₩9,117.7B
₩38.9B


SKC Co Ltd
011790
5.53%
₩5,509.8B
₩50.1B


Ecopro BM Co Ltd
247540
3.87%
₩4,546.1B
₩26.3B


Iljin Materials Co Ltd
020150
2.77%
₩3,255.4B
₩15.5B


L&amp;F Co., Ltd.
066970
2.85%
₩2,625.4B
₩41.6B


SoulBrain Co Ltd
357780
2.58%
₩2,568.5B
₩9.4B


Chunbo Co Ltd
278280
1.50%
₩1,853.0B
₩9.2B

Source: KRX











KRX Bio K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


Samsung Biologics Co Ltd
207940
27.57%
₩55,313.9B
₩196.2B


Celltrion, Inc.
068270
22.41%
₩33,625.7B
₩164.3B


Celltrion HealthCare Co Ltd
091990
10.79%
₩18,490.4B
₩107.9B


SK Biopharmaceuticals Co Ltd
326030
25.87%
₩9,984.9B
₩41.1B


Celltrion Pharm Inc
068760
2.39%
₩5,653.7B
₩36.5B


Hanmi Science Co Ltd
008930
1.41%
₩4,691.1B
₩15.9B


Yuhan Corp
000100
3.16%
₩4,478.3B
₩16.2B


Shinpoong Pharmaceutical Co Ltd
019170
2.66%
₩4,339.5B
₩216.5B


Green Cross Corp
006280
1.61%
₩3,728.0B
₩52.2B


Seegene Inc
096530
2.12%
₩3,352.9B
₩58.6B

Source: KRX











KRX Internet K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


Kakao Corp
035720
36.25%
₩68,809.1B
₩405.9B


Naver Corp
035420
23.55%
₩65,376.8B
₩245.8B


Duzon Bizon Co Ltd
012510
17.42%
₩2,530.4B
₩17.5B


KMW Co Ltd
032500
6.74%
₩2,289.7B
₩15.6B


NHN KCP Corp
060250
3.60%
₩1,450.6B
₩6.5B


AfreecaTV Co Ltd
067160
4.14%
₩1,249.5B
₩13.4B


Ace Technologies Corp.
088800
2.65%
₩852.8B
₩12.2B


Seojin System Co Ltd
178320
2.55%
₩839.0B
₩8.8B


Ahnlab Inc
053800
1.95%
₩720.0B
₩6.4B


Rsupport Co Ltd
131370
1.15%
₩470.9B
₩2.7B

Source: KRX











KRX Game K-New Deal Index
Ticker
Weight
Market cap
30-day average daily trade value


NCSoft Corp
036570
21.23%
₩17,958.4B
₩74.0B


Netmarble Corp
251270
26.10%
₩11,560.7B
₩46.2B


PearlAbyss Corp
263750
8.85%
₩4,410.4B
₩12.2B


Kakao Games Corp
293490
25.95%
₩4,305.6B
₩30.4B


Com2uS Corp
078340
4.92%
₩1,688.1B
₩31.4B


NHN Corp
181710
3.38%
₩1,543.7B
₩5.7B


Doubleu Games Co Ltd
192080
2.55%
₩1,205.2B
₩7.1B


Webzen Inc
069080
3.05%
₩1,145.8B
₩9.8B


Wemade Co Ltd
112040
2.16%
₩971.0B
₩10.1B


Neptune Co
217270
1.81%
₩819.8B
₩4.1B

Source: KRX



KRX BBIG Index Rebalancing Preview: SK IE Tech, SK Bioscience, Krafton, Kakao Games, & Pearl Abyss

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.

Price Gauge
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Krafton (259960 KS)

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

New Games Launches by Krafton & Its Major Competitors in 2021

We discuss the major new game launches by Krafton and its major competitors in the rest of 2021. We also discuss how poor IPOs of Krafton and SD...

Douglas Kim

KRX BBIG Index Rebalancing Preview: SK IE Tech, SK Bioscience, Krafton, Kakao Games, & Pearl Abyss

This post previews the KRX BBIG Index (including 4 sub-indices) scheduled for August 31, 2021. The notable names include SK Bioscience, SK IE...

Sanghyun Park

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52-week Range

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P/E

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