© Archyde.com. “Lion Heart’s listing is being closed”… ‘Crash’ Kagem, what is the direction of the stock price? [신현아의 IPO 그후]
Kakao Games’ share price is going through ups and downs. The stock price plummeted 58% this year due to triple bad news, including the controversy over the operation of Uma Musume due to the absence of new titles and the listing issue of its subsidiary Lion Heart Studio. The unfavorable macro environment of interest rate hikes was also busy pulling growth stocks down.
According to the Korea Exchange on the 16th, Kakao Games finished trading at 38,250 won on the 14th. It was Kakao Games, which changed its new low price and went down to 30,000 won for the first time since listing.
The day ended sharply as the controversy over the news of Lionheart’s delisting was resolved. This is because fears that the corporate value of the parent company, Kakao Games, will fall if Lionheart, the developer of Odin, the core cash cow of Kakao Games, goes public has been reflected in the stock price.
However, it is difficult to say that the share price has fully recovered since the decline has been so great. The closing price on the 14th fell 58% compared to the beginning of this year. Compared to the 52-week high (116,000 won on November 17 of last year), it fell 67%. The starting price (48,000 won) is also well below the level. As there is a view that the sharp rise on this day is a short-term rebound, it is also necessary to wait and see whether the uptrend will continue. 2021, when Odin ran at the box office… Prayer to rise to second place in market capitalization Image = Kakao Games Kakao Games is a listed company as the No. 1 subsidiary of Kakao (KS:). It entered the market on September 10, 2020. As it was selected as a big word in the IPO market, it recorded a ‘dazzle’ record, where the opening price on the first day of listing doubled from the public offering price (24,000 won) and then soared to 6,2400 won, the price limit (30%). . Its market capitalization grew to 4.56 trillion won at the time, rising to the fifth place in the KOSDAQ market cap at once.
The analysis that the second half of 2020 was a period when public offering stocks were craze, and the expectation that the new ‘Elion’ was released two months ahead pushed up the stock price. Game stocks tend to rise sharply with the launch of new games. The stock price of Kakao Games has been running high since the launch of Odin, the flagship game on June 29, last year.
Of course, there was also the impact of good markets last year, with the KOSPI exceeding the 3,000 mark. However, as Odin was more successful than expected, the stock price hovered around 40,000-50,000 won, then went straight to the 70,000 won level and then rose to 100,000 won.
As the stock price soared, Kakao Games rose to the 2nd place (currently 6th) in the market capitalization ranking. All of this happened one month following the launch of Odin (June 29-July 29 last year). The stock price soared by a whopping 70% during this period. Unlike 2021, when the absence of new titles, the operation of Uma Musume, and the controversy over the listing of subsidiaries were full of good news, this year, the range of stock price fluctuations expanded due to a series of bad news amid the stock market slump. Game stocks, which are usually classified as growth stocks, receive downward pressure on their stock prices due to higher discount rates during interest rate hikes. Korea’s leading game stocks, such as NCsoft (KS:) (57%) and Pearl Abyss (72%), all fell significantly from their 52-week highs compared to other industries.
In the midst of this, as the controversy over the inexperience of the operation of ‘Uma Musume’, which was released in June this year, and the problem of ‘duplicate listing’ of Lion Heart, the investor sentiment toward Kakao Games was further weakened. The listing of Lionheart was expected from the beginning of this year, but the controversy rekindled when Lionheart submitted a securities declaration on the 30th of last month. Kakao Games is the largest shareholder with a 54.94% stake in Lion Heart, and Lion Heart is the developer of Odin, the core revenue source of Kakao Games.
When Lionheart is listed, the corporate value is double-counted (double counting), raising concerns that the parent company’s value may be undervalued. Moreover, as Lionheart’s market cap is likely to exceed that of Kakao Games, the issue of parent company discount has been highlighted. As of the 14th closing price, Kakao Games’ market capitalization is expected to be 3.14 trillion won, and Lion Heart’s market capitalization is expected to be in the range of 3.1 trillion to 4.56 trillion won.
Kim Hyun-yong, a researcher at Hyundai Motor Securities, said, “The core cash cow business, which accounts for 65% of Kakao Games (KQ:)’s operating profit, will be listed once more as a separate corporation, so it will be difficult to avoid discount issues due to overlapping listings.” It is for this reason that investors opposed the listing of Lionheart.
As both Kakao Games and Lion Heart are listed as separate corporations rather than a physical division that separates business divisions, they are arguing that there will be no damage to the corporate value or stock price due to double counting. Officials from each company explain that this is the reason why the Korea Exchange approved the preliminary examination for listing.
An official in the information technology (IT) industry said, “Recently, related articles such as ‘duplicate/split listing’ have been pouring out, but it is actually incorrect information. “I think the impact on the yen will be negligible,” he said. Kagem soars by 9% due to the delay of Lionheart listing… “Temporary rebound” vs “Upward momentum” On the 13th, Lionheart announced that it would delay listing. The company said, “It is difficult to properly evaluate the value of the company in the rapidly changing market conditions.” However, he made it clear that it is a ‘withdrawal of demand forecasting’, not a ‘complete withdrawal’. The timing is unclear, but it means that the company can go public once more at any time.
A Lionheart official said, “We plan to resubmit the securities declaration at that time,” adding, “We plan to resubmit the securities declaration at that time.” He further emphasized that “the only thing certain is that we have a firm will to go public.”
The day following news of the listing suspension was announced, the stock price of Kakao Games soared. It is analyzed that this is due to the fact that concerns over the parent company discount have been resolved ahead of the listing.
Analysts are predicting that the rally will be short-lived. A researcher at a securities company who requested anonymity said, “Since the listing is not a complete withdrawal, I don’t think the uptrend will last long until the issue is resolved.” “The listing issue will act as a downside risk.”
Kim Ha-jeong, a researcher at Daol Investment & Securities, said, “The stock price is expected to respond temporarily to the issue of withdrawing the securities declaration of the subsidiary Lion Heart Studio. said.
Some even predict that the listing of Lionheart will be a good thing. Another brokerage researcher explained, “I don’t think the stock price of Kakao Games will rise for just one day.”
He added, “If the market conditions are good, the issue of duplicate listing will not arise as it is now,” he added.
The researcher also said, “The ‘put option’ problem, which occurs when the two companies do not go public under the agreement of the two companies, is an option that does not have a large valuation burden. Whether it is listed or not, it is good news for Kakao Games.”
Shin Hyun-ah, reporter at Hankyung.com sha0119@hankyung.com
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