Netmarble Games IPO debut tripped up by regulator ban

REUTERS/Kim Hong-Ji/File Photo

SEOUL (Reuters) – Netmarble Games stumbled in its market debut on Friday as a regulatory ban on minors playing its mega-hit game spooked some investors who had clamored to buy into the success of the South Korea’s largest smartphone games maker.

The stock opened at 165,000 won ($146.65), above the IPO price of 157,000 won, and rose as high as 9.2% in early trade before falling as far down as its IPO price at one point before recovering back to near opening levels. The KOSPI index was down 0.5% as of 0424 GMT.

A Netmarble spokeswoman on Friday confirmed media reports that the gaming regulator had barred anyone aged 18 and under from playing its mega-hit game “Lineage II: Revolution” until the company changes an in-game item trading system.

The spokeswoman said the company would change the feature in the age 12-plus role playing game, which gaming data provider SuperData named the world’s biggest earning game in February even though it was only available at home.

Media reports had said the ban was expected to last for at least two weeks, but Netmarble and the regulator declined to comment on the timeframe.

South Korea is the world’s fourth-largest gaming market, with annual revenue of about $4 billion, data from researcher Newzoo showed.

Analysts described the ban as a temporary setback and said Netmarble’s ability to churn out hits in a crowded smartphone gaming market made it a sound bet. The follow-up to Lineage II – “PentaStorm” – is the most popular game on the Google Android store in South Korea on Friday.

“Compared to other Asian game developers such as Mixi or GungHo that have not had a notable follow-up after they released mega-hit games, Netmarble has steadily released hits,” said Shinyoung Securities analyst Jang Won-yeol.

A shortage of tradeable shares will also help support the stock, brokers said.

About 17.6 million shares out of 84.7 million total are available for trade, with the rest – almost all owned by controlling and strategic shareholders such as Netmarble founder Bang Jun-hyuk and China’s Tencent Holdings – in a six-month lock-up.

Netmarble said in April it expects to have a war chest of some $4.4 billion for acquisitions after the listing to realise its goal of becoming one of world’s top five games companies by 2020 with 5 trillion won in annual revenue.

The company had priced its April IPO, which last month raised $2.3 billion in South Korea’s second-largest initial public offering, at the top of an indicative range.

($1 = 1,126.1000 won)

(Reporting by Joyce Lee; Editing by Miral Fahmy)

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