Naver Webtoon Loses Momentum After Nasdaq Listing with Only 0.1% Sales Growth in Q2...

Stock Price at $11.44... 45.5% Drop from IPO Price
Due to Weak Stock, US Class Action Law Firms Recruiting Plaintiffs

The stock price of Webtoon Entertainment, which attracted attention after being listed on the US Nasdaq, has recently been struggling. Webtoon Entertainment is a company that holds 100% of Naver Webtoon shares, and at the time of its listing, it aimed to become the "Disney of Asia," but now its growth is being questioned.

According to the industry on the 11th, the stock price of Webtoon Entertainment was recorded at $11.44 as of the 10th (local time). Compared to the public offering price of $21, it is about half. On the 12th of last month, it even fell to a 52-week low of $10.22.

At the time of listing, Webtoon Entertainment was expected to grow by expanding into North America, Europe, and Japan, as well as domestically. The decision to list on Nasdaq rather than domestically is interpreted as an attempt to leverage the symbolism and liquidity of the global capital market. In particular, confidence was gained as the cumulative views of "Lore Olympus," a reinterpretation of Greek mythology, exceeded 1.3 billion, and it won the Ringo Award, a major US comic award, for three consecutive years. The work "Mafia Nanny," targeting the North American market, also attracted attention, and an increase in revenue was expected through paid content provision, advertising, merchandise sales, and secondary works based on these works, utilizing intellectual property (IP).

However, concerns have recently grown that this growth trend will no longer continue. In particular, users are not increasing in regions other than major countries such as Korea and Japan. The monthly active users (MAU) in regions excluding Korea and Japan were recorded at 121.1 million in the second quarter, the same as the previous year. Monthly paying users (MPU) decreased by 2% to 1.8 million during the same period. There are also concerns that the predominance of works focused on specific genres such as time-travel stories leads to a lack of diversity, which results in decreased interest.

This has led to revenue limitations. Last year, the year-on-year revenue growth rate was at least 11% and up to over 33% each quarter, but in the first quarter of this year, it was 5.3%, and in the second quarter, the growth rate was only 0.1%. Although it is explained that the weakness of major revenue currencies such as the Korean won and Japanese yen caused the revenue in dollar terms not to increase significantly, the analysis that investors have turned away is gaining credibility.

As the stock price stagnated, external negative factors also emerged. Several US capital market-related class action law firms are recruiting participants for lawsuits, claiming that Webtoon Entertainment deliberately did not disclose negative information in its securities registration statement.

Aram Kim, a researcher at Shinhan Investment Corp., explained, "Uber, Lyft, and Coupang also faced similar shareholder lawsuits due to sharp stock price drops immediately after their IPOs, so this is not a very unusual case." However, the company stated, "We are aware of the civil lawsuits alleging violations of US securities laws" and "plan to strongly defend ourselves."

Naver Webtoon recently faced labor-management conflicts as well. Conflicts have intensified over additional compensation after listing. The labor union pointed out that compensation is concentrated among some, including executives. For example, Kim Jun-gu, CEO of Naver Webtoon, received a cash bonus of $30 million and holds restricted stock units (RSUs) for 14,815 common shares and options to purchase 3,461,670 shares at $11.04 per share. The Korean Confederation of Trade Unions’ Chemical, Textile, and Food Workers’ Union Naver branch has submitted a labor dispute mediation application to the Gyeonggi Regional Labor Relations Commission.