Private equity firm IMM Investment is expected to generate handsome returns on its investment in Krafton as the gaming company, best known for the shooter game PlayerUnknown’s Battlegrounds, prepares for an initial public offering (IPO).

Krafton recently named Mirae Asset Daewoo as the lead underwriter and Credit Suisse, Citigroup Global Markets Korea Securities, JP Morgan and NH Investment & Securities as co-underwriters for its much-awaited IPO in 2021, industry sources said on Friday (October 30).

The company could be valued at tens of trillions of won. Krafton shares have recently been trading over the counter at 1.6 million won ($1,404), with a market capitalization of approximately 14 trillion won ($12.3 billion).

“Krafton’s value is likely to be dependent on the atmosphere in the stock market next year, while the company wants to list its shares as soon as possible,” said an industry source. “The company’s financial performance is improving dramatically thanks to its successful global release and this will have a positive impact on its valuation.”

Krafton recorded an operating income of 513.7 billion won in the first six months of this year, up nearly fourfold from the same period last year. Existing investors in Krafton are expected to partly exit their shareholdings, as the gaming company plans to list its old and new shares together.

IMM Investment has invested in the firm three times since 2009, with the first two stakes arranged through consortiums with venture capital funds, including KNet Investment Partners. In 2014, IMM Investment acquired redeemable convertible preference shares (RCPS) in Krafton worth 13.5 billion won, along with Premier Partners. 

The company changed its strategy for its third investment, placed through a private equity fund. In 2018, IMM Investment invested in Krafton by establishing Belize One LLC with private equity firm JKL Partners and NHN Investment. Belize One purchased RCPS at 650,000 won per share, which were converted into common shares.  

IMM Investment has also boosted the amount of invested capital to 200 billion won. In contrast, JKL Partners has only put 50 billion won into Krafton, and NHN Investment has injected 9 billion won.

Market watchers believe IMM Investment could make healthy returns on its investments through the IPO as Krafton shares, which traded over the counter at 400,000 won level in April, have risen sharply in recent months.

“IMM Investment has increased its investment along with the rise in Krafton’s valuation,” said an industry source. “The PE firm’s three investments in the gaming company show its strong trust in Krafton.” (Reporting by Byung-yoon Kim)