Sorry Korea, Netmarble stands alone in its success
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Sorry Korea, Netmarble stands alone in its success

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Netmarble Games produced South Korea’s largest IPO in seven years last week, in a deal many are hailing as a shining light for Asian ECM. But the optimists should be realistic about Korea. The success of the game maker’s W2.7tr ($2.4bn) IPO is an isolated case and unlikely to lead to a revival in domestic listings.

The positive response to Netmarble’s IPO was widely expected from the get-go, thanks to a host of factors. The industry it operates in — online and mobile gaming — is huge in Korea and growing, giving the company’s business an attractive bottom line.  

In addition, it also benefits from a charismatic founder, Bang Jun-hyuk, who has been compared to Apple’s co-founder and former chief executive Steve Jobs. Bang, a high school dropout who founded Netmarble in 2000, is credited with creating a lot of demand during the management roadshow for the IPO, say ECM bankers.

So the near 200 investors that flocked to the transaction did so based on the company’s merits. And they came amid volatility in global markets and rising tensions in the region, with the Korean peninsula increasingly being jostled by the US and China.

Against that backdrop, Netmarble’s outcome is certainly laudable. The shares were sold at the top of guidance and at a small premium to the issuer’s closest domestic comparable. And so strong was the demand for the institutional tranche that many investors went home empty-handed.  

So it’s understandable that some bankers reckon the IPO is expected to give a fillip to sentiment and ECM activity in the country. But it would pay to be cautious.

The reality is that sizeable IPOs are rare in Korea, and so investors that have the country on their radar typically wait and watch to snap up any opportunity that may arise from a quality company.

For example, there have been only 20 listings over $100m since January 1, 2015, until the time of writing, according to Dealogic data. Of them, just nine have been worth over $200m and four over $500m, with the latter deals coming in the past six months.

Given that, it’s not a surprise that Netmarble fit the bill for investors hungry for more Korea exposure. And it’s also worth noting that its stock proved appealing given the recent negative news around conglomerates like the Lotte Group and Samsung Group, and a shelved multi-billion-dollar IPO from Hotel Lotte.

Sure, a successful deal will serve as a confident boost for any company in Asia considering an internationally marketed listing. But any ECM bankers or investors hoping for more from Korea will be disappointed: the country’s IPO market has likely hit its peak for the year.