Tencent-backed Shift Up to raise up to $313 mn in IPO

Shift Up Corp., the South Korean game developer behind the global hit game “Goddess of Victory: Nikke,” could raise up to 435 billion won ($313 million) from its upcoming new share sales on the country's Kospi bourse, which will be mainly used to develop new titles with seasoned developers.

The game maker plans to sell 7,250,000 new shares on the public market, and its guided IPO price band is set between 47,000 won and 60,000 per share, according to the company’s announcement on Tuesday.

If the IPO stock price is set at the top end, the company’s market cap would reach up to 3.5 trillion won, making it the fourth largest among Korea’s listed gaming companies, after Krafton Inc., Netmarble Corp. and NCSOFT Corp.

If its IPO is successful, it is expected to give a big boost to other Korean gaming companies’ public listings later this year, market analysts said.

Shift Up will use the IPO proceeds mainly to develop new games instead of acquiring existing intellectual properties of other developers or publishers, to reinforce its identity as an unrivaled game developer, Shift Up founder and CEO Kim Hyung-tae said during a press conference on Tuesday.

FORTE IN GAME DEVELOPMENT

Shift Up’s strength lies in its ability to develop high-quality games with the industry's top developers and designers.

A year ago, it scouted former OpenAI engineer Kim Tae-hoon to enhance its game artificial intelligence (AI) technology. 

Its latest title “Stellar Blade,” a console game, sold more than 1 million copies in the two months since its launch in April.

Sales of the new game topped the charts in eight countries, including the US, Britain, Canada and Japan, garnering 15.8 billion won in sales in May.

Another title, “Goddess of Victory: Nikke,” which was published in 2022, remains a popular game, reaping 15.5 billion won in sales last month alone.

Nikke is a third-person shooting game. It is free-to-play and is monetized uses a gacha (toy vending machine) game system.

Shift Up’s sales don’t depend heavily on one title, which bodes well for the company’s growth, said market analysts.

OVERVALUATION CONCERNS

But some analysts raised concerns over the possible overvaluation of the company estimated at over 3 trillion won for the upcoming IPO.

Its IPO underwriters estimated Shift Up’s enterprise value based on a 39.25 times price-earnings ratio, compared with ratios of 35 to 41 of its global peers such as Square Enix Holdings Co., Cyberagent Inc. and Kadokawa Corp.

It's as high as Korea’s largest market-cap game stock Krafton’s PER of 43.8 times, applied during its IPO in 2021, which was considered overpriced at the time.

Shift Up, which debuted its first game “Destiny Child” in 2016, was valued at about 2 trillion won last October when Chinese tech giant Tencent Holdings Ltd. acquired an additional 4% stake in the game developer from Korean gaming company Wemade Co.

Tencent owns a 40.1% stake as the second-largest shareholder, second only to Shift Up CEO Kim, who holds 45%.

Its value has increased by more than 75% over the past six months thanks to its record earnings and games. The company posted 111 billion won in operating profit in 2023, up 328% on-year, and 168.6 billion won in revenue, up 155% during the same period.

In comparison, its Japanese peer Square Enix earned 85.6 billion yen ($535.5 million) in revenue in the first quarter of this year only. 

Shift Up will determine its IPO stock price on Thursday with its lead co-underwriters —Korea Investment & Securities Co., NH Investment & Securities Co. and JP Morgan Securities’ Seoul office.

Public subscription to the shares is scheduled for July 2 and 3.

Write to Ju-Hyun Lee at 2juhyun@hankyung.com
Sookyung Seo edited this article.