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Krafton IPO shines a light on the Asia story

June 30, 2021

Filippo Giachi

VP – APAC, Middle East & Africa

Should Krafton’s stock market listing be approved by regulators, its valuation could make the games company South Korea’s biggest-ever initial public offering (IPO) on the Kospi bourse. The company is looking to raise as much as US$5bn by selling more than 10m shares (including 7m new shares), which could deliver a market capitalisation of up to US$31bn.[i]

Reports suggest that a price-to-earnings ratio of 45.2 will put Krafton on a par with entertainment companies such as Walt Disney and Warner Music Group.[ii] An unexpected comparison for a game developer that has made much of its revenue from a single title – PlayerUnknown BattleGrounds (PUBG). Krafton is now planning to expand its intellectual property (IP) and business portfolio to include web-based cartoons, movies, and animation.

PUBG drives success

PUBG is one of the highest-grossing video games of all time, with up to 55m daily users (excluding China) on weekends and 70m copies of the game sold for PC and game consoles. Sensor Tower Store Intelligence data indicates it became only one of five games to generate more than US$1bn in 2020.[iii] Its success helped Krafton grow its 2020 turnover 53% year on year to around (US$1.5bn) while operating profit more than doubled to US$685m.

PUBG Mobile ranked as the 6th mobile game worldwide in terms of consumer spending in the first quarter of 2021 and third in terms of monthly active users, according to App Annie. In South Korea, PUBG Mobile was ranked second in terms of monthly active users over the entire course of 2020 (second only to Nexon’s Kartrider Rush) and 7th in terms of downloads. Almost half (46%) of Internet users aged between 16 and 64 in South Korea use mobile game apps at least once a month, according to GlobalWebIndex. At the same time, Statista’s market outlook for e-commerce, travel, mobility and digital media estimates that spending on video games in the country expanded 24% in 2020 to reach US$5.4bn.

Mobile games continue the ascent

Krafton’s inflated market cap illustrates how mobile games’ sales are booming, eclipsing static or shrinking revenue made from PC and console titles. Krafton generated around US$1.2bn of its turnover from mobile devices in 2020, for example, up 145% year on year from US$48.3m in 2019. By contrast, sales from PCs fell 70% from US$39.8m to US$23.4m in the same period, while console revenue too dropped 172% from US$7.1m to US$2.7m.

Only US$179m of Krafton’s US$1.25bn global revenue comes from its home market, demonstrating how PUBG has truly become a global phenomenon. The revenue from the US and Europe are still not as significant as regions like Asia, Middle East, Africa and Latin America. Newzoo forecasts that the global games market will generate revenues of US$176bn in 2021, a slight year-on-year decline of 1.1%. The reason for that is the runaway growth of the coronavirus impacted 2020, which expanded over 23% in 2019 to be worth US$178bn, the highest ever recorded by the research company. While that performance will be challenging to replicate this year, long term growth looks promising.

Newzoo estimates that turnover from smartphone titles will grow 4.7% year on year in 2021, to reach US$79bn, while tablet games too will expand 2% to be worth US$11.6bn. That growth will be offset by continuing declines in PC and console games; however, with pandemic induced supply chain issues delaying the availability of new consoles and lockdown restrictions causing delays in the development and production of new game releases.

Those problems are much less likely to disrupt the flow of new mobile games, which generally have a lower development complexity. And while the removal of Apple’s Identifier for Advertisers (IDFA) in iOS 14 will impact titles that rely on advertising for their revenue, Newzoo expects that mobile gaming will continue to be the fastest-growing segment of the market over the next few years.

New dawn for Krafton

That trend puts Krafton on a firm footing for future expansion, but the long-term success of its IPO may depend on it proving to investors it has more than just PUGB up its sleeve.

Krafton is now working on several global titles, including a new battle royale game – PUBG: New State – scheduled for launch later this year [2021], and Striking Distance Studio’s The Callisto Protocol, a single-player survival horror game currently planned for 2022. Plans to create an animated show and web cartoon that depict the game’s universe were outlined by chief executive Kim Chang-han earlier this year. Investments in companies like India’s electronic sports (eSports) content creation and event production firm Nodwin Gaming and streaming platform Loco[iv] also suggest that Krafton is building a platform that will target games enthusiasts beyond PUGB devotees in the future.


[i] South Korea Krafton’s $5 billion IPO could be delayed by up to a fortnight – sources, Reuters, 28th June 2021

[ii] [News Focus] Krafton’s valuation questioned ahead of IPO, The Korea Herald, 27th June 2021

[iii] PUBG Mobile Tops List of Billion-Dollar Mobile Games in 2020, SensorTower, 15th December 2020

[iv] Krafton invests in Indian video game streaming startup Loco, LiveMint, 28th June 2021

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