[Asia Economy Reporter Ji Yeon-jin] The corporate value of CJ ENM, which acquired the production company of the movie ‘La La Land,’ has recently been declining. Rather than the expectation that the company would expand its business scope into the global content market through a massive M&A deal worth over 1 trillion won, the ‘physical spin-off learning effect’ is holding back the stock price.
CJ ENM’s stock price fell more than 4% in early trading on the 25th, dropping to the low 150,000 won range. The company’s stock price has been sharply declining for four consecutive days since the 22nd. The closing price on the 19th, just before the continuous decline began, was 180,400 won.
On the 19th, CJ ENM announced that it would acquire 80% of the shares, including management rights, of the U.S. production company ‘Endeavor Content,’ and also disclosed plans to establish a new company through a physical spin-off to strengthen its content production capabilities. The new company is planned to be responsible for major productions in entertainment, drama, film, and animation businesses.
The market interprets this as formalizing ‘Studio Tiger (tentative name)’ following CJ Group’s drama production company ‘Studio Dragon,’ which has dampened investor sentiment. A physical spin-off involves dividing a company’s assets and liabilities to establish a new subsidiary, and it often acts as a negative factor due to concerns that separating core businesses may weaken the competitiveness of the parent company. For example, LG Chem and SK Innovation saw their stock prices plummet after announcing physical spin-offs of their battery businesses.
Previously, CJ ENM spun off its drama production division in 2016 to establish Studio Dragon, which was then listed in November 2017. Lee Ki-hoon, a researcher at Hana Financial Investment, said, “There is no growth strategy for CJ ENM after the spin-off. At the very least, a commerce strategy encompassing all of these should accompany it, but the fact that all growth strategies are being spun off is somewhat disappointing,” and lowered the target stock price by 6% to 235,000 won on the day.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
