Shares in Krafton Inc , the Tencent Holdings-backed South Korean company behind blockbuster video game "PlayerUnknown's Battlegrounds" (PUBG), fell by 20% from their IPO price on their trading debut on Tuesday, Reuters reports.
Analysts attributed the tumble to an expensive valuation and China regulation risks, with gaming companies facing uncertain prospects after China regulators have come down hard on a number of industries, upending norms with new guidance and rules.
Krafton is the first large South Korean listing whose shares have failed to rise above the initial public offering (IPO) price on debut since a pickup in floatations last year.
The stock was last at 444,000 won in morning trade, down 11% from the IPO price of 498,000 won, valuing the company at about US$18.9 billion.
Listings such as HYBE, formerly known as Big Hit and the manager of K-Pop group BTS, and battery material maker SK IE Technology Co Ltd (SKIET) had muted debuts, but closed above their IPO prices on the first day of trade.
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 earns fees from a profit distribution scheme for providing technology services for "Peacekeeper Elite", a game similar to "PUBG Mobile" that is usually among China's top two grossing games, it said in an IPO filing.
"About 70% (of sales) appear to be from Tencent," LightStream Research analyst Mio Kato told Reuters. "China has already made noises about (Tencent's) 'Honor of Kings' ... If they also request changes for 'Peacekeeper Elite' that would be a negative and could be a very large negative."
