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Korean online-gaming firm files for U.S. IPO

Gravity, which hopes to raise $88 million, is following in the footsteps of China's Shanda Interactive.

Gravity, a Korean online-gaming company that wants to expand internationally, filed for a public offering in the United States on Thursday.

The company, which hopes to raise $88 million in the initial public offering, is following in the footsteps of China's Shanda Interactive, which went public in the United States last year. Since its IPO last May, Shanda's stock has risen from $11 to more than $30.

Like some other online-gaming companies, Gravity is riding a trajectory of growth. Revenue for the first nine months of 2004 came to $41.6 million (48 billion won), a 72.1 percent increase over revenues of $24.2 million for the same period in 2003, according to its filing with the Securities and Exchange Commission. Net income for the same period rose 134 percent to $18.4 million. For 2003 as a whole, revenue rose 332 percent to hit $36.8 million, while a net loss in 2002 turned to a $12.7 million profit. Revenue comes from subscriptions and licensing fees.

Overall, online gaming was a $1.9 billion business worldwide, according to IDC, with most subscribers coming out of Asia.

In October, Gravity hit a peak of more than 770,000 concurrent users. On average, there are 400,000 concurrent users in the company's five key markets: Japan, China, Korea, Thailand and Thailand/Hong Kong. The company also has subscribers in the United States, Canada and various European countries. In 2005, Gravity hopes to expand into four to seven more countries and deeper into China, in part because the market has matured in Korea and Taiwan, according to the SEC filing.

Currently, Gravity serves up only one title: Ragnarok, a medieval fantasy game with space-age overtones. The name Ragnarok derives from a battle in Norse mythology where the gods fought the giants. Starting in the first quarter, Gravity will launch a new game in Korea called R.O.S.E.

Proceeds from the IPO will go toward game development ($26 million), acquiring and publishing games from third-party developers ($26 million) and enhancing marketing, distribution and service capabilities.

Gravity will offer 9.3 million American Depositary Shares in the IPO. Each ADR will be worth one quarter of a share of stock. The ADRs are expected to be priced at between $13.50 and $15.50. Underwriters include Credit Suisse First Boston and Daewoo Securities. No date was set for the IPO.