The public offering, Japan's biggest this year, was several times oversubscribed, reflecting investor expectations that the firm will continue to expand profits thanks to the increasing popularity of online gaming both domestically and overseas.
"There are not that many Japanese companies with overseas growth stories. That makes it attractive," said Toru Hashizume, chief investment officer at Stats Investment Management. He declined to say if Stats would participate in the IPO.
Nexon said it would sell shares at 1,300 yen each, picking the middle of a tentative range of 1,200-1,400 yen after sounding out investors for the global offering last week. It will list on the Tokyo Stock Exchange on December 14.
At the IPO price Nexon will raise about 91 billion yen ($1.2 billion) and boast a market value of 560 billion yen, roughly the same as mobile gaming firm Gree Inc, whose stock has jumped more than 7 times since listing three years ago.
The pricing came after Zynga, known for its success with games on Facebook, was forced last week to lower the expected valuation for its IPO this month, due to weak markets and macroeconomic uncertainty.
While demand for Nexon was strong, a decision was made not to price at the top of the range to ensure a good mix of long-term investors and give the stock a good shot at rising after listing, a source with knowledge of the book-building said.
A cyber attack in which hackers gained access to personal but no financial information on more than 13 million subscribers to its popular role playing game MapleStory in South Korea probably took some of the shine off the IPO, a Japanese broker not involved in the offering said.
"There has been increasing caution among investors, which is why it did not come in at the top of the 1,200-1,400 yen range," said Takashi Matsumoto, a director at Okasan Securities.
VIRTUAL ITEMS
The IPO, Japan's largest since drugmaker Otsuka Holdings took in 160 billion yen in December 2010, was launched despite weak market conditions, with the benchmark Nikkei average down 15 percent since the start of the year.
Last week Nikko Asset Management, which was also due to list in Tokyo this month, cancelled its IPO. Nexon, established in South Korea in 1994, plans to use 14 billion yen of the proceeds to pay off debt, another 9 billion yen to construct a new building for its main subsidiary Nexon Korea Corporation and the remainder on upgrading games systems, including potential investments in third-party games developers.
Nexon's most successful offerings include MapleStory and KartRider. Its operating profit tripled to 30 billion yen in the year to December 2010 from 2008, while sales increased more than 70 percent to 70 billion yen.
Nexon offers PC-based games for free while charging small amounts for in-game virtual items, a business model analysts see as relatively recession-proof.
At the offering price Nexon would trade at 15 times projected consensus earnings for calendar 2012, according to the source, putting it roughly in line with Gree.
Nexon is selling half of the shares overseas and half in Japan.
Nomura Securities, Morgan Stanley and Goldman Sachs are joint global coordinators, while Barclays Capital is a bookrunner on the international tranche. For the latest updates on the stock market, visit Stock Market Today
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