[Post-IPO] Giant Step, Growing Bigger Amid Market Restructuring

Amid Intensifying Competition in CG·VFX Industry, Capital Market Secures Funds
685 Billion Won Allocated for M&A from Capital Increase
Employee Stock Ownership Association on 'Money Cushion' Ahead of Lock-up Period Expiry

[Asia Economy Reporter Hyungsoo Park] Giant Step, which was listed on the KOSDAQ market last March, is set to aggressively expand its scale based on the funds raised in the domestic stock market.

According to the Financial Supervisory Service's electronic disclosure system on the 3rd, Giant Step raised 113 billion KRW through an initial public offering (IPO) and a rights offering last year.

At the time of listing, 1.4 million new shares were issued at the public offering price of 11,000 KRW per share. Of the funds raised, 15 billion KRW was allocated for facility funds, operating funds, and acquisition of securities of other companies. Nine months after listing, Giant Step raised an additional 98.5 billion KRW through a rights offering. The new share issuance price surged to 78,100 KRW.

The reason Giant Step proceeded with a rights offering less than a year after raising funds through the IPO is based on the judgment that competition to dominate the metaverse market is intensifying. Economies of scale are emerging as a key competitive advantage in the CG and VFX industries. Naver acquired Locus, one of Giant Step's competitors. Due to the prolonged COVID-19 pandemic, some small companies have closed, and the market is being reorganized around medium and large-scale CG and VFX companies. Giant Step has attracted strategic investors (SIs) such as Naver and HYBE as partner companies.

Giant Step plans to use 68.5 billion KRW of the raised funds to review mergers and acquisitions (M&A) mainly targeting companies involved in metaverse and extended reality (XR) content development. The review is expected to be completed in the first half of this year, and the company will pursue expansion through M&A. This is also expected to strengthen its competitiveness in the metaverse business.

With ample financial resources, Giant Step plans to launch more than 10 virtual characters this year. Samsung Securities estimates that the virtual influencer market using digital humans will grow 5.8 times from 2020 to reach 14 trillion KRW by 2025. Giant Step secured digital human technology through 'Vincent,' a digital human it developed in 2019.

Last year, it unveiled virtual avatars such as 'ae' for SM Entertainment's girl group aespa and digital humans like 'Han Yu-a' and 'Navis' for Smilegate and aespa, respectively. Rather than simply working on a contract basis, the company is expanding its business by securing virtual character IPs and developing various revenue models.

Giant Step's real-time content sales grew from 4 billion KRW in 2020 to double that amount last year. Investment in expanding virtual studios using IPO funds has increased related sales. The company plans to further invest the funds raised through the rights offering to increase the number of studios to four or five.

Giant Step recorded sales of 33.2 billion KRW and an operating loss of 3.1 billion KRW last year. Sales increased by 64% year-on-year due to the commercialization of real-time content. However, losses also grew as research and development (R&D) expenses increased.

Although there has been a correction in metaverse-related stocks in the domestic stock market this year, the employee stock ownership association that received the public offering shares expects to realize gains as the lock-up period expires. When Giant Step was listed on the KOSDAQ market on March 24 last year, it allocated 124,497 public offering shares to the employee stock ownership association, accounting for 8.9% of the total public offering volume. This corresponds to approximately 1.37 billion KRW based on the public offering price.

Giant Step also conducted a bonus issue alongside the rights offering. Considering that one new share was received for each old share, the employee stock ownership association's estimated return exceeds 760%.