The First Listed Company is Kakao Games... Why Chairman Kim Beom-su's Choice?

The first business started in 1998 was gaming
Benefiting from non-face-to-face business amid prolonged COVID-19
Judged the right time to maximize business value
Other affiliates also accelerate IPOs

[Asia Economy Reporter Jin-gyu Lee] Kakao Games is set to become the first listed company among Kakao affiliates. The selection of Kakao Games as the first to go public is believed to reflect the intentions of Kim Beom-su, Chairman of Kakao’s Board of Directors, who has deep insight into the gaming business. It is also analyzed that the prolonged COVID-19 pandemic, which benefited non-face-to-face businesses, created an opportunity to maximize the value of the gaming business.

Chairman Kim Beom-su, an Expert in the Gaming Business

Kakao Games will begin the final public offering price determination process by starting institutional demand forecasting on the 26th, officially entering the KOSDAQ listing procedure. After conducting a public subscription for individual investors on the 1st and 2nd of next month, it is scheduled to enter the KOSDAQ market on the 11th of the same month. The total number of newly issued shares is 16 million, and the expected price band for the public offering is 20,000 to 24,000 KRW per share. Based on this price band, the public offering size is estimated between 320 billion and 384 billion KRW. The raised funds will be used to strengthen game development capabilities, secure new intellectual property (IP), and expand global operations.

The reason Kakao Games is leading as the first listed company among Kakao affiliates is largely attributed to Chairman Kim’s decision to designate gaming as the biggest beneficiary of the non-face-to-face (untact) business. Kim is already recognized in the IT industry as an expert in the gaming business. In fact, his first business venture was in gaming. In the late 1990s, as PC bangs and online games surged in popularity, he left Samsung SDS, where he had been working, and founded Hangame in 1998. Namgoong Hoon, the current CEO of Kakao Games, was a member who worked with Kim in establishing Hangame. Later, in 2000, Hangame merged with Naver, led by Lee Hae-jin, a Samsung SDS colleague, and Kim became co-CEO of NHN. In 2004, after serving as the sole CEO of NHN, he also took on the role of head of overseas business.

Expectations to Maximize Untact Value

This listing of Kakao Games comes two years after it withdrew its initial public offering (IPO) attempt in 2018. Since then, Kakao Games’ valuation has soared. While its corporate value was around 1 trillion KRW in 2018, it is now estimated to have reached about 2 trillion KRW, thanks to strong support from Kakao. Kakao owns 'KakaoTalk,' the number one mobile messenger in Korea with 46 million monthly active users (MAU), and Kakao Games operates its gaming business based on this platform. Additionally, 'Daum Games,' a PC platform with approximately 26 million MAU, also has capabilities through its PC bang network for game services.

Kakao Games’ gaming service capabilities are among the best in Korea. It offers a variety of game genres across multiple platforms including PC, mobile, and VR, ranging from puzzle games like 'Friends Pop' to hardcore games like 'Battlegrounds.' Following the success of the mobile game 'Moonlight Sculptor' launched last year, the recently released mobile title 'Guardian Tales' ranked high in Google Play’s revenue charts last month. Kakao Games plans to accelerate local market penetration of Guardian Tales by acquiring Southeast Asian mobile game service company 'Glohow.'

Kakao Games will also release the most anticipated PC game of the second half of the year. It plans to launch 'Elyon,' a PC massively multiplayer online role-playing game (MMORPG) developed by Krafton, in the fourth quarter. Elyon is attracting significant attention even before its release, as it is the first large-scale PC MMORPG to be launched in two years since Smilegate’s 'Lost Ark' in November 2018.

Kakao Games achieved sales of 203 billion KRW and operating profit of 28.7 billion KRW in the first half of this year alone. Considering that it recorded sales of 101.3 billion KRW and operating profit of 10.1 billion KRW in its founding year of 2016, this represents about a fourfold increase in four years.

Other Affiliates Accelerate IPOs

Following Kakao Games’ listing, other prominent Kakao affiliates are also expected to speed up preparations for their IPOs. Candidates include Kakao Commerce, which handles e-commerce, Kakao Page, responsible for content business, Kakao Bank, Kakao Mobility, and Kakao Pay. These affiliates have shown significant growth this year, benefiting from the untact trend amid the COVID-19 pandemic, and are considered well-prepared for going public.