'Baby Shark' SmartStudy Nears Unicorn Status

Recently valued at 810 billion KRW in the OTC market... Corporate value quadrupled in 1.5 years
Explosive performance growth... Operating profit up 316% YoY
Baby Shark's popularity surpasses BTS... Potential expansion as an IP business operator

[Asia Economy Reporter Minwoo Lee] The corporate value of SmartStudy, which provides content for infants and toddlers such as 'Baby Shark' and 'Pinkfong' worldwide, has surpassed 800 billion KRW. It is being evaluated that the company is on the verge of becoming the twelfth 'unicorn' (a private startup valued at over 1 trillion KRW) in South Korea.

According to the investment banking (IB) industry on the 6th, at the end of last month, shares worth 3.2 billion KRW of SmartStudy appeared on the over-the-counter market. An asset management company sold entrusted shares in the form of income securities through a fund of funds. The number of shares sold was reported to be 800 million. The corporate value was evaluated at 810 billion KRW at the time of sale. Considering that the corporate value was only around 200 billion KRW as of March last year, the corporate value has risen sharply. Earlier, in March last year, a domestic venture investment firm purchased old shares worth 10 billion KRW at a corporate value of 200 billion KRW. Then, in September last year, over-the-counter shares worth 6.8 billion KRW were traded based on a corporate value of 360 billion KRW. In a year and a half, the corporate value has more than quadrupled. SmartStudy has been consistently mentioned as a next unicorn company, and concrete figures supporting this have appeared in the over-the-counter market.

Industry insiders see the rise to unicorn status as a matter of time given SmartStudy's successful trend. According to the audit report submitted to the Financial Supervisory Service, SmartStudy recorded sales of 76.8 billion KRW and operating profit of 31.2 billion KRW last year. This represents growth of 92% and 316%, respectively, compared to the same period the previous year. This is thanks to the global popularity of SmartStudy's infant and toddler content led by Pinkfong and Baby Shark.

Last year, SmartStudy's content such as Pinkfong and Baby Shark was played a total of 15 billion times. On YouTube alone, it approached 9.5 billion views. This is more than double the 4.1 billion YouTube views of the globally popular idol group BTS last year. According to YouTube channel analytics firm SocialBlade.com, the estimated channel revenue is expected to grow rapidly from $15.4 million (17.8 billion KRW) in 2018 to $33.8 million (39 billion KRW) this year. This exceeds the estimated revenue of $29.4 million (34 billion KRW) for Big Hit's YouTube channel, to which BTS belongs. The 'Baby Shark Live' musical tour, which started in the U.S. last October, attracted 90,000 viewers across 33 cities.

SmartStudy is highly valued not just for the temporary popularity of a single character but for its potential to further expand its licensing business based on intellectual property (IP) in the future. As of January last year, the licensing portion of sales was about 15%, but by the end of the year, it had expanded to 38%, and as of the first half of this year, it reached 66.5%. The company has signed licensing contracts with about 2,000 global companies, including the world's largest cereal maker Kellogg's, Crocs, and Crayola. An industry insider said, "Compared to BTS, which has issues such as military service and profit distribution, characters like Baby Shark and Pinkfong can secure relatively stable operating profits," adding, "Although overseas sales account for 80-90%, the impact of the COVID-19 pandemic is minimal because it is online-based."

On the contrary, the increase in home time for key consumers such as infants and children due to COVID-19 has been a boon. The cumulative global YouTube views of 'Baby Shark Dance' increased rapidly from 5.2 billion in May to 6.7 billion as of today, a rise of about 1.5 billion in five months. The gap with the first place, which was over 2 billion views, has narrowed to about 200 million views since the COVID-19 outbreak. At this rate, it is expected to achieve first place in the second half of the year. According to SocialBlade.com, SmartStudy earned an A+ grade, higher than Big Hit's channel (A grade), in a comprehensive rating based on subscribers, estimated channel revenue, and views. Only 40 channels worldwide have an A+ grade. Global content companies Disney and Marvel received B- and B+ grades, respectively.

SmartStudy has selected Mirae Asset Daewoo as its lead underwriter and plans to pursue an IPO around next year. It is expected that the corporate value could exceed 1.6 trillion KRW upon listing. Accordingly, Samsung Publishing, which holds shares in SmartStudy, is also expected to profit. Samsung Publishing is the second-largest shareholder with an 18.59% stake in SmartStudy. If SmartStudy is valued at 1.6 trillion KRW upon listing, the value of Samsung Publishing's shares will approach 300 billion KRW.