[Post-IPO] SNK, Sales Spike Only at Listing with ‘Neo Geo Mini’①

Product Sales Plunge 95%
Stock Price Also Drops to One-Third

IR materials presenting the performance forecast proposed by SNK at the time of its KOSDAQ listing in May 2019.

[Asia Economy Reporter Jang Hyowon] The small gaming device 'Neo Geo Mini' by SNK, a company listed on the KOSDAQ, showed a spike in sales only at the time of its listing. Sales related to the small gaming device significantly declined after the listing.

According to the Financial Supervisory Service's electronic disclosure on the 28th, SNK's cumulative sales for the third quarter (fiscal year ending July, from July 2019 to April 2020) amounted to 5 billion yen (approximately 54.2 billion KRW), a 35.9% decrease compared to the same period last year. Operating profit and net profit also dropped by 60% each during the same period, to 1.6 billion yen (approximately 17.3 billion KRW) and 1.2 billion yen (approximately 13 billion KRW), respectively.

SNK is a company engaged in the licensing business of Japanese arcade game intellectual property (IP). It provides IPs such as The King of Fighters, Metal Slug, and Samurai Shodown to game developers and receives royalties. IP licensing accounts for more than half of total sales, while mobile games, console and PC games, merchandise, and other sales make up the rest.

The main cause of the decline in third-quarter performance was a sharp drop in merchandise and other sales. At the end of the third quarter, SNK's merchandise and other sales were 66 million yen (approximately 700 million KRW), shrinking by about 95% compared to 1.2 billion yen (approximately 13 billion KRW) in the same period last year. The sales proportion also plummeted from 15.61% to 1.33%.

Last year's merchandise sales were driven by the sales of the small gaming device. SNK released the 'Neo Geo Mini,' a small gaming device containing classic arcade games, in July 2018. The company purchased the gaming devices from a manufacturing plant in China and supplied them to domestic distributors, generating distribution sales.

Merchandise sales related to the small gaming device occurred only briefly at the time SNK was listed. SNK was listed on the KOSDAQ market in May last year. Thanks to this, SNK achieved sales of 9.9 billion yen (approximately 107.5 billion KRW) from July 2018 to July 2019, an increase of about 45% compared to 6.8 billion yen (approximately 73.8 billion KRW) in the same period the previous year.

An SNK official said, "Neo Geo Mini was popular when it was released, but sales declined over time. This year, sales have been sluggish, but there were some sales from new joystick products related to Neo Geo Mini."

With strong performance and rosy prospects, SNK's public offering price was set at the top of the desired range at 40,400 KRW, raising a total of 169.7 billion KRW. If the public offering price had been set at the bottom of the desired range, 30,800 KRW, the total raised would have been 129.3 billion KRW, approximately 40 billion KRW less.

As SNK's performance declined contrary to expectations, its stock price also plummeted. As of the previous day, SNK's stock price was 12,400 KRW, down 69.3% compared to the public offering price of 40,400 KRW.

Meanwhile, SNK failed to submit its audit report by the deadline of the 21st. The company explained that since its headquarters are in Osaka, Japan, and its main business activities are in China, the audit process has been delayed due to the recent COVID-19 outbreak.