This is a story about my failed ESOP investment at age 22, and how it changed the trajectory of my life.
Introduction
In the summer of 2021, as a Krafton employee, I purchased approximately 620 million won (about $563,000 USD) worth of employee stock. At its lowest point, I was down about 440 million won (about $400,000 USD). This is the story of what led me to make such a significant decision, and how it changed my life in my twenties.
Alternative Military Service
I joined Krafton, then best known for PUBG (PlayerUnknown’s Battlegrounds), through an alternative military service program. For those unfamiliar with the system, here’s a brief explanation:
Officially called IT Industrial Technical Personnel (Supplementary Service), it’s one of several alternative military service programs.
(1) The Commissioner of the Military Manpower Administration shall select designated entities (excluding agricultural corporations and after-sales service enterprises) for which expert research personnel or industrial technical personnel will serve, from among research institutions, key industrial enterprises and defense industrial enterprises, according to the standards determined by Presidential Decree.
[Article 36 (Selection etc. of Designated Entities)]
You fulfill your military obligation by working at a company designated by the Military Manpower Administration, serving for two years, including four weeks of basic military training, before being discharged. A similar alternative service is the IT Specialized Research Personnel program, which is only available to master’s/doctoral degree holders and requires about three years of service.
Being able to fulfill my military duty by working at a company instead of going to the army? I was thrilled. I had no interest in spending two years of my twenties as a soldier.
Little did I know, this alternative military service program would completely change the trajectory of my life.
First Impressions of Krafton
While applying to various companies for alternative military service, I discovered that PUBG, the game I had played obsessively with friends throughout high school and uni, was made in Korea. Even better, it was a company where I could serve my alternative military duty. I was amazed and excited to apply.
The stylish PUBG office café on the 7th floor of Majesta City in Seocho, the premium interior design featuring PUBG IP, and the incredible cafeteria were enough to ignite the company loyalty of 21-year-old me on day one.
My loyalty only grew stronger when, about a year after joining, the company raised all developer salaries by 20 million won ($20k USD) across the board.²
NEW STATE Mobile
The project I worked on for two years at Krafton was called NEW STATE Mobile, a mobile version of PUBG.
When I told people I was working on a mobile version of PUBG, they usually asked:
But there’s already PUBG MOBILE. Why make another one?
While PUBG Mobile was already successfully operating, there were several reasons for creating NEW STATE.
Why PUBG Developed NEW STATE
Disclaimer: The following explanations do not represent the company’s position whatsoever. These are strictly my personal views.
1. Preserving Original Gameplay
If you’ve played both PUBG Mobile and PUBG on PC, you know they’re similar yet different. PUBG on PC focuses on realistic gunplay, gritty survival, and battle royale, maintaining its original ruleset with minimal changes. The game itself is quite difficult, and given the genre’s nature, where only one out of a hundred players wins, the journey to victory delivers unmatched catharsis. If you’ve played the game, you know the adrenaline rush, the dopamine hit of getting that chicken dinner after fighting off the other 99 players.
PUBG Mobile, on the other hand, is much more casual, as it’s a mobile game. The mobile version has reduced weapon recoil, added convenience features, and simpler graphics adapted for phones. It’s more fast-paced: when the PC version lasts about 30 minutes per game, the mobile version often ends in 10–15 minutes.
There are also frequent updates that break from the original ruleset. For example, during a League of Legends collaboration event, PUBG Mobile characters could transform into Jinx, Vi, or Caitlyn. Your character might fly around or even transform into a werewolf.
NEW STATE was a challenge to bring PUBG to mobile while preserving the PC version’s originality. We hoped to differentiate from existing PUBG Mobile by bringing higher-quality graphics, more realistic gunplay, and gameplay closer to the original PUBG.
2. The Need for Self-Developed Mobile Games
PUBG Mobile wasn’t actually developed by Krafton. Krafton shared the IP and various initial technologies with Tencent, a Chinese company, and Tencent developed and published PUBG Mobile.
The PC gaming market’s growth appeared stagnant compared to the explosive growth of the mobile gaming market. With COVID, more people started playing mobile games, but Krafton’s main revenue came from PC/console games (excluding PUBG Mobile).
Therefore, the company likely wanted to develop a mobile game using the PUBG IP in-house. I also assume there was a strategy to secure future mobile titles by building mobile development capabilities through NEW STATE.
3. Targeting the Indian Market
In 2020, PUBG MOBILE was hugely popular in India, but the Indian government banned the service due to its association with China.⁴ If NEW STATE, developed 100% in Korea, succeeded as PUBG Mobile had, it wouldn’t be banned in India due to Chinese connections.
Krafton has long viewed the Indian market as attractive, so I assume they hoped NEW STATE would succeed to penetrate India.
NEW STATE’s Potential for Success
And truthfully, in my opinion, the biggest reason for creating NEW STATE was the success of PUBG Mobile. PUBG Mobile is one of the most successful mobile games worldwide.
According to Sensor Tower (a mobile app analytics website) in May 2022, PUBG Mobile had already recorded $8 billion in lifetime revenue.⁵ A single mobile game earned $8 billion in about two years! That’s insane to think about.
Looking back, it was an unrealistic assumption, but I thought naïvely: “If NEW STATE could reach even 10% of PUBG Mobile’s revenue, that would be $800 MILLION USD in total revenue.” Being naturally optimistic about the future, I had unfounded confidence: “If PUBG Mobile can succeed, why can’t NEW STATE?”
Reflecting on the NEW STATE team’s atmosphere at the time, this belief in success wasn’t just mine. It seemed to permeate the entire team. We were like a small startup within Krafton, full of hopes and dreams.
As if answering our belief, NEW STATE’s pre-registration numbers reached approximately 50 million.
Fifty million!
Doesn’t that roughly equal South Korea’s entire population?
Globally, a number of people equivalent to South Korea’s population had pre-registered for NEW STATE. These pre-registrations were through the Apple App Store and Google Play Store, meaning the app would automatically install on pre-registered users’ smartphones at launch. We had essentially secured 50 million app installs through pre-registration. (Of course, if phones lacked storage space or had unstable networks on launch day, downloads might not complete.)
At the time, as a data engineer, I was the one who pulled the 50 million pre-registration figure from the App Store and Play Store. Even I couldn’t believe the number and checked multiple times. I even contacted our Google Play account manager, who confirmed that while there might be a slight margin of error, the pre-registration numbers were accurate.
For the NEW STATE team, the 50 million pre-registrations further elevated the mood. People worked overtime without being asked, and the company began allocating massive marketing budgets. External media started reporting on NEW STATE’s pre-registration numbers, and Krafton’s OTC stock price soared.
As if reading the momentum, news came that Krafton would go public.
Employee Stock Ownership Plan Offering
Krafton prepared for its IPO, and guidance about purchasing employee stock began circulating among employees.
An employee stock ownership plan, commonly called ESOP, is widely used to boost morale by allowing workers to purchase their company’s stock under favorable conditions and to help build wealth by letting them enjoy gains if the stock appreciates.⁶
Characteristics of employee stock:
- 1-year mandatory holding period during which shares cannot be withdrawn
- However, withdrawal is possible if you quit your job even during the mandatory period
- Tax benefits exist: income deduction, tax deferral, dividend income tax exemption
- In Krafton’s case, employee stock collateral loans were available through Korea Securities Finance Corp
(Note that ESOP in South Korea is not the same as employee stock options or restricted stock units (RSUs). With ESOP, employees buy the shares; they are not granted.)
Although I couldn’t sell for a year unless I quit, I thought it was a great opportunity to share in the company’s stock appreciation as an insider.
What I saw as the biggest appeal of the employee stock was the leverage effect. When else could a regular office worker borrow and invest about $500K in stocks?
I did some research on other public Korean gaming studios, and all except one were trading above their IPO prices.
Krafton’s market cap was already pretty high, but I wasn’t expecting huge returns, I thought it was a reasonably “safe investment” that could beat the market.
Especially after watching the stock price trends of companies that IPO’d the previous year and that year, my worries about losses gradually faded.
Surely it won’t fall below the IPO price?
The 2021 IPO Market Frenzy
2020–2021 was a period when an outstanding number of companies went public. Coupled with unprecedented government liquidity policies due to COVID-19, the stock market was soaring day after day. Here are some companies that went public during this period:
Kakao Games
A game company like Krafton that went public in the second half of 2020. On its first day, it rose to 81,100 won, more than triple its IPO price of 24,000 won. News frequently circulated about Kakao Games employees who bought ESOP and became wealthy overnight.
SK Biopharmaceuticals
SK Biopharmaceuticals also listed on KOSPI in the second half of 2020. On the first day, it traded around 127,000 won, about 2.5× its IPO price of 49,000 won. Multiple articles reported SK Biopharmaceuticals employees who acquired ESOP hitting the jackpot and quitting en masse. (You have to quit your job to sell and realize gains from ESOP.)
Kakao Bank
Kakao Bank’s IPO had a memorable headline that’s still talked about:
Kakao Bank surpasses the combined market cap of the 4 major banks (KB Kookmin, Shinhan, Hana, Woori)!
Kakao Bank’s market cap at listing was about 39 trillion won, similar to the combined market cap of the four major financial holding companies. Articles about Kakao Bank employees transforming their lives with ESOP poured out daily. Even in the software developer community, people traded stories of a friend-of-a-friend at Kakao Bank who had already “retired.”
Beyond these three companies, many others went public, and what’s commonly called “따상” (opening at double the IPO price) was common. Seeing these success stories, I began to hope that Krafton might follow a similar trajectory. Of course, since Krafton’s market cap was already high, I didn’t realistically expect “따상,” but I did expect some appreciation.
Warning Signs Before the IPO
However, there were several warning signs about Krafton’s IPO, which I conveniently ignored.
High IPO Price
Krafton’s desired IPO price range was an eye-popping 458,000 to 557,000 won. This valuation compared Krafton to global content companies like Walt Disney and Warner Music Group, applying their average P/E ratio of 45×. The upper end of the initial desired price band, 557,000 won, was even higher than the over-the-counter price of 550,000 won at the time of filing the securities registration.
An industry insider said, “There has never been a case where the IPO price was higher than the OTC price among companies listed so far,” adding, “The per-share price is also the most expensive among companies listed in the past 10 years, which inevitably creates market resistance.” (Hankyung, Reporter Jeon Ye-jin)⁷
Eventually, Krafton received criticism from the Financial Supervisory Service¹ and lowered the desired price range to 400,000 to 498,000 won, with the final IPO price set at 498,000 won. The top of the range.
Low Demand from Institutional Investors
This article sums up the situation nicely:
South Korean game developer Krafton Inc.’s initial public offering, the largest domestic IPO in the second half, drew weaker demand from institutional investors than other companies’ listings. The IPO was hundreds of times oversubscribed, while others were more than 1,000 times oversubscribed. Institutional investors took a conservative approach as the listing was much larger than others amid debate over high valuation.
The rather lackluster reaction from institutional investors, compared to other mega IPOs, was worrisome. But I rationalized that it might be because institutional investors didn’t need to place aggressive bids for Krafton, since the IPO size was bigger than other listings (as the article above suggests).
My ESOP Purchase
Despite these warning signs, my hopes for the NEW STATE project and my faith in Krafton were strong. So I bought 1,256 shares of Krafton employee stock, totaling (498,000 won × 1,256 shares) approximately 625 million won ($563,000 USD).
I wasn’t the only one who invested heavily. Many colleagues on the NEW STATE data team also subscribed to over 1,000 shares. Perhaps because we were the team that first witnessed the pre-registration numbers, everyone seemed to have conviction about the future. (Or we were crazy and irrational.)
I secured the funds for the employee stock purchase as follows:
- College tuition I had saved
- Employee stock collateral loan from Korea Securities Finance
- Company-affiliated bank loans
- Family support
At 22 years old, with trembling hands, I sent the largest bank transfer I had ever made. I even had to go to the bank in person to raise my account’s transfer limit for the first time in my life.
Surely it won’t fall below the IPO price?
Listing Day
On listing day, I opened the stock app with shaking hands to see the opening price at 448,500 won. Already 10% below the IPO price. The opening price on listing day is determined through simultaneous bidding within a 90–200% range of the IPO price, and 448,500 won was only 300 won above the theoretical minimum opening price of 448,200 won. Right from the start, my employee stock valuation dropped about 10%, and 22-year-old me broke into a cold sweat for the first time in my life. I don’t think I had ever had a cold sweat before that day.
Losing nearly 50 million won ($50,000 USD) in a single day is an experience I never want to repeat.
Around the time of the listing, a colleague from my team created a Slack channel where we collectively chanted “Youngcha” (a Korean cheer meaning “heave-ho”), praying for the stock price to rise. As of late 2024, you can still hear the cries of Krafton members suffering from ESOP in that Slack channel.
NEW STATE Launch and Stock Price Reaching 580,000 Won
Krafton’s stock price gradually recovered from the initial shock and climbed back to the 500,000-won range. Phew. I was no longer at a loss.
NEW STATE finally launched on November 11, 2021, and, riding its initial popularity, the stock price hit its peak of 580,000 won on November 19. At that moment, I felt relieved, thinking, “Thank goodness! I wasn’t wrong. NEW STATE is a game changer.”
NEW STATE’s Struggles
But the joy was short-lived. NEW STATE’s user numbers dwindled over time. On launch day, servers were unstable, with frequent bugs and crashes (something to do with our Kubernetes clusters and Istio networking.) Many gamers were disappointed from day one.
The advanced graphics we intended to use for differentiation backfired: users with low-spec phones struggled even to run the game.
Our intended “differentiation” didn’t work in the market:
- Existing PUBG Mobile users tried NEW STATE but returned to PUBG Mobile. Most mobile players preferred casual gameplay.
- Users who loved the PC version’s originality never bothered to switch to mobile.
- High system requirements limited new user acquisition in countries where the vast majority of the population used cheaper smartphones.
Stock Crash and Evaporating Wealth
The market noticed NEW STATE’s poor performance. Krafton’s stock price plummeted like a waterfall, dropping from its peak of 580,000 won to an all-time low of 145,900 won by the end of 2023. My employee stock valuation of approximately 625 million won shrank to about 180 million won (145,900 won × 1,256 shares; $163K USD) at the bottom.
I was down 70%.
Someone might ask why I didn’t sell when the stock was at 580,000 won.
First, when the stock was at 580,000 won, the one-year mandatory holding period hadn’t passed yet, so I couldn’t sell. I could have sold if I had quit, but I was busy preparing for the NEW STATE launch at work and didn’t even consider resigning. Also, the resignation process, repaying the employee stock collateral loan through selling, and withdrawing shares takes at least four weeks. Because of this four-week delay, I couldn’t hastily decide to resign until the stock price stabilized on a clear trajectory.
Life Changes
Postponed Dreams
Before the NEW STATE launch and Krafton’s IPO, I had already completed my military service obligation. Free from the Military Manpower Administration, I could have quit and gone back to university anytime. However, I wanted to experience the launch of the project I’d been part of for about two years and witness my company’s public listing. That’s why I stayed and worked even after discharge. I’d also hoped ESOP would help me fund my college tuition. Out-of-state tuition is no joke.
My plan at the time was:
- Complete alternative military service
- Return to and graduate from my undergraduate program
- Get a job at a US Big Tech company through the OPT program
- Settle in the US with an H-1B visa
Sadly, the employee stock indefinitely postponed this plan. First, I had depleted my saved tuition on the ESOP, and significant loan interest was accumulating. The won-dollar exchange rate kept rising, pushing my return to school even further away.
The Gap with My Peers
Meanwhile, my US college classmates all graduated and got jobs at Silicon Valley Big Tech companies. During the COVID era, Big Tech companies aggressively expanded hiring, and new-grad developer salaries skyrocketed. Most of my peers were earning $150,000–$250,000 annually.
This couldn’t be happening.
I had lost $300,000 through employee stock, while my peers were earning that much during the same period.
The comparison was painful.
I was envious. Jealous, even.
And anxiety crept in.
Beyond simple salary differences, there was also a qualitative gap in career experience. No matter how much I wanted to deny it, experience at Krafton and experience at a Silicon Valley Big Tech company were valued differently in the market. I had to work harder to catch up with my peers.
I blamed myself, the military service, Krafton, NEW STATE, everything. If I had just stayed in university and gotten a job, I wouldn’t have been in this hellhole.
The employee stock had unintentionally pushed me into a corner with my back against the wall.
A New Challenge: The Blockchain Project
New Role
About four months after the NEW STATE launch, Krafton consolidated each studio’s data team into headquarters. There used to be a data team per studio, but Krafton merged them into one. Our team moved from NEW STATE to Krafton HQ’s unified data team, which managed all of Krafton’s game data in an integrated fashion.
Krafton HQ was stable. Unlike being part of a new project like NEW STATE. But it was also a position without big successes or failures. Crunching the numbers on my salary and average wage growth, I figured I could pay off the employee stock debt and save for tuition again if I worked for about five years. Five years of working at HQ, earning, saving, spending. I could lay out the next five years of my life in an Excel spreadsheet.
But I didn’t want that stable, predictable life where I just calculate my salary and expenses. I was still in my early-to-mid twenties. I had no family to feed, no children to raise, no mortgage to pay. I didn’t want to spend this period of my life doing uneventful work. Moreover, having experienced NEW STATE’s failure, I wanted an even bigger challenge. I wanted to taste the sweet fruit of success so badly.
Just then, at a Krafton town hall, CEO Kim Chang-han casually mentioned pursuing a blockchain project. Already interested in blockchain technology, I immediately contacted the project manager.
At the time, even blockchain games lacking polish or fun were getting tons of attention simply because they used “blockchain.” What if Krafton made a proper blockchain game, not just a sloppy product with “blockchain” slapped on it? Being naturally optimistic, I got excited imagining the future again.
That’s how I transferred to become a core backend developer for a new and challenging blockchain project.
Why I Chose an Internal Transfer Over Changing Companies
Someone might ask, “Why didn’t you consider changing companies?” There’s a saying I like:
A bird sitting on a tree is never afraid of the branch breaking, because its trust is not in the branch, but in its own wings.
I believe corporate workers should always sharpen their wings so they’re ready to fly even if the branch breaks. Of course, I was confident in my abilities too.
But there were practical constraints. Even with decent wings, I couldn’t fly with the heavy shackles of ESOP loans.
Resigning meant I had to repay the entire ESOP loan. I had nowhere near enough cash to do that at once. That meant I’d have to refinance with a commercial bank loan. But just then, the era of zero interest rates ended and the era of high interest rates led by the Federal Reserve arrived. The US federal funds rate began exceeding 5%. I wasn’t confident I could handle commercial bank loans at much higher rates than the low-interest ESOP loan.
I couldn’t leave the company, but I wanted a new challenge. So Krafton’s ambitious blockchain project was the best choice for me.
The Blockchain Project
The Challenges of a New Endeavor
The blockchain project wasn’t smooth sailing either. Shortly after the team formed, the Terra/Luna collapse happened, and crypto market liquidity dried up. External perception of blockchain turned cold, and recruiting blockchain developers became difficult.
But these hardships only made our team stronger. We became more immersed in R&D to create a blockchain project that “made sense.” We wanted to build something with real value, real fun, and real, solid blockchain usage.
The result is Settlus, a blockchain. I’ve written in detail about what this blockchain is and why it makes sense in my previous blog post. Settlus is still in the testnet phase but will soon launch its mainnet.
Personal Growth
Over the past two years working on the blockchain project, I’ve grown immensely. Server development, cryptography, finance. I’ve built a breadth of knowledge incomparable to my days as a data engineer. If ESOP hadn’t pushed me into a corner, I probably wouldn’t have had such challenging experiences.
Hope for Stock Recovery
New Anticipated Titles
As of 2024, Krafton’s stock price has recovered significantly. The stock that plummeted to the 140,000-won range has climbed back to around 330,000 won. Still down ~33% from the IPO price, but better than being down 70%.
Market interest in Krafton is also reviving.
The future outlook is bright:
- inZOI: Receiving full attention from existing Sims fans
- Dark and Darker Mobile: Hot response from beta tests and overseas game conferences
- Subnautica 2: Generating enormous buzz from trailers, with gameplay proven in the previous title
- Palworld Mobile: Krafton is developing a mobile version of the PC game that exploded in popularity and recorded the second-highest concurrent players in Steam history
- The Bird That Drinks Tears: An AAA game based on a strong IP
- PUBG on PC: Breaking all-time revenue records with collaborations with Lamborghini, BLACKPINK, NewJeans, etc.
- BGMI: Krafton’s independently developed game cruising in the Indian market
Outlook as Shareholder and Employee
As NCSoft’s stock price declined (previously the undisputed #1 market cap among domestic gaming stocks), the weighting of domestic gaming-sector ETFs shifted significantly toward Krafton. Foreign investor demand has been steady, making it a stock with high foreign ownership.
As both a Krafton shareholder and employee, I still believe this stock is undervalued. There’s plenty of room for appreciation.
Closing Thoughts
The past three years were really tough. But I can finally catch my breath now. I’ve paid off a good portion of the loans I took for ESOP. US stocks I invested in here and there have steadily risen, which helped. Krafton’s stock price has also recovered to the 300,000-won range.
And, most fortunately, I still have plenty of time left to mess around and try things. At 25, there are still many opportunities.
The employee stock failure actually increased my risk tolerance.
Among the winds that blew at me, you were the biggest storm.
All those rainstorms and the coming snowstorms, too
have now become spring breezes.
(I Was Lucky / Kwon Jin-ah)
Like the lyrics say, thanks to the storm-like pain and trials I experienced in my early twenties, any future challenges feel less frightening.
I will continue to live a life that’s challenging, optimistic, and resilient.
(But no more life-changing, risky investments… 😅)