'Goddess of Victory: Nike' and 'Stella Blade' Successive Hits
Major Shareholder CEO Kim Hyeong-tae's Stock Value Up to 1.4 Trillion
Improved Investor Sentiment as Game Stocks Escape Bottom Range Recently
Game developer Shift Up is pursuing a listing on the KOSPI market. The value of shares held by Kim Hyung-tae, the largest shareholder and CEO of Shift Up, is expected to exceed at least 1 trillion KRW.
According to the Financial Supervisory Service's electronic disclosure system on the 22nd, Shift Up will issue 7.25 million new shares for its initial public offering (IPO). The proposed price range per share is 47,000 to 60,000 KRW. The total offering size amounts to 341 billion to 435 billion KRW, marking the largest scale this year.
From the 3rd to the 13th of next month, a book-building process will be conducted targeting institutional investors to determine the final offering price. Subscription for the general public will take place over two days, on the 18th and 19th.
Founded in 2013, Shift Up developed the mobile game 'Goddess of Victory: NIKKE' and the console game 'Stella Blade.' Leveraging its game development capabilities encompassing both visuals and sound, the company has consecutively released popular games, recording sales of 168.6 billion KRW, operating profit of 111.1 billion KRW, and net profit of 106.7 billion KRW last year. Its publishing partners include Tencent, the world's largest mobile game publisher, and Sony, the largest console platform operator.
CEO Kim Hyung-tae holds approximately 22.66 million shares. After the offering, his stake will be 39.05%. Based on the proposed price range, the value of his shares is estimated between 1.07 trillion and 1.36 trillion KRW. He will be able to dispose of his shares one year after listing. Kim, a former renowned illustrator, worked as an art director at NCSoft before founding Shift Up in 2013. Aceville Pte., a subsidiary of Tencent, holds 35.03% of shares, making it the second-largest shareholder.
Kim stated, "Based on our development capabilities to produce high-quality game content, we are creating games loved by many users. The funds raised through the offering will be used to strengthen the IPs of our games currently in service."
Joint lead managers Korea Investment & Securities, NH Investment & Securities, and J.P. Morgan Securities Seoul Branch selected Japanese game developers Square Enix, CyberAgent, and Kadokawa as comparable companies to assess Shift Up’s appropriate corporate value. They applied an average price-to-earnings ratio (PER) of 39.25 times and recent four-quarter net profit of 106.6 billion KRW. After calculating a per-share valuation of 70,421 KRW, they set the proposed price range by applying a discount rate of 14.8% to 33.3%.
The lead managers considered the genres of Shift Up’s flagship games, 'Goddess of Victory: NIKKE' and 'Stella Blade,' which are subculture and console games respectively, as important factors. Most major domestic game companies listed on the stock market develop massively multiplayer online role-playing games (MMORPGs). Considering monetization structures and competitive relationships between games, domestic listed game companies such as NCSoft were excluded from the comparable companies. The relatively better recent performance of the Japanese stock market compared to the domestic market also likely influenced the selection of comparable companies. Leading domestic game companies like Krafton and NCSoft are trading at around a PER of 20 times.
To achieve a high offering price, it is important to present reasons for selecting comparable companies that investors can relate to, as well as grounds for future growth. The game sector, which had experienced prolonged stock price stagnation in the domestic market, is seeing a rebound following the first-quarter earnings announcements. The recovery of investor sentiment in the game industry could be a positive factor.
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