Webtoon Entertainment IPO Preview

• Webtoon Entertainment is getting ready to complete its IPO on the NASDAQ exchange in 2H 2024. Webtoon Entertainment is a subsidiary of Naver Corp (035420 KS).

• Webtoon is seeking to raise as much of US$500 million at a valuation of US$3 billion to US$4 billion.

• Webtoon Entertainment is one of the largest Korean company related IPOs in 2024.

Webtoon Entertainment ("Webtoon") is getting ready to complete its IPO on the NASDAQ exchange in 2H 2024. Webtoon Entertainment is a subsidiary of Naver Corp (035420 KS). Webtoon is seeking to raise as much of US$500 million at a valuation of US$3 billion to US$4 billion. The main bankers in this deal include Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co. and Evercore Inc.

Webtoon Entertainment Company Background

Founded in 2005, Webtoon Entertainment is a leading global online online cartoon ("webtoon") platform. Webtoon Entertainmnet is the number one webtoon company in the world. Naver Corp (035420 KS) owns a 71.2% stake in Webtoon Entertainment. LY Corp is the second largest shareholder with a 28.7% stake in the company.

The company was originally founded as a unit of Naver and carved out in 2017. Webtoon Entertainment specializes on web comics and web novels. Its community connects 24 million creators with about 170 million monthly active users in over 150 countries around the world. It started to expand overseas in 2013. More than 11 years have passed since Naver Webtoon expanded its business overseas and it has now become the number one company in the world in the webtoon market.

Webtoon Entertainment has subsidiaries such as Naver Webtoon, Line Digital Frontier, the operator of Line Manga (Japan), and Wattpad (Canada). By acquiring Wattpad and E-book Initiative Japan, Webtoon Entertainment has created a structure to supply and distribute customized intellectual property rights (IP). Naver Webtoon launched the Line Manga in Japan in April 2013. Starting in 2021, Naver Webtoon has also launched a ‘cross-border’ strategy of uploading a large number of original domestic webtoon contents to Line Manga.

On the company's platform, creators tell long-form stories through serialized narratives in the form of short-form, bite-sized episodes, creating a habitual behavior with an engaged user base. These stories are primarily told in two ways—web-comics, a graphical comic-like medium, and web-novels, which are text-based stories.

The company is able to monetize its contents by adapting it into other media formats such as film, streaming series, games, merchandise and print books. Over the past decade, the company has adapted over 900 titles, including over 100 streaming series and films, more than 200 books, over 70 games and over 11 million consumer product units as of March 31, 2024. Cumulatively, the company has paid out over $2.8 billion to creators between 2017 and 2023. Webtoon's primary user base is Gen Z and millennials.

Strong growth of global webtoon market - The global webtoons market is expected to increase from US$5.1 billion in 2023 to US$20.4 billion in 2030, representing a CAGR of 21.4% during the forecast period, according to Marketresearch.com. China is the largest market for webtoons globally. The webtoon market in China is expected to increase from US$1.5 billion in 2023 to US6.7 billion in 2030, representing a CAGR of 23.4% in this period. The webtoon market in North America is expected to grow from US$0.6 billion in 2023 to US$2.1 billion in 2030, representing a CAGR of 20% in this period.

Major competitors - The major competitors in the global webtoon market include Kakao, Comico (NHN), KidariStudio, Ridibooks (RIDI Corp), Tappytoon, Tencent, Webcomics (SideWalk Group), and Mr Blue, etc. In 2023, the top five players accounted for nearly 51% of the global market for webtoons (in terms of revenues). Webtoons are digital comics that have become very popular in Asian countries including China, Japan and South Korea. Webtoons are also becoming popular in other countries around the world including United States, Taiwan, Vietnam, and Malaysia.

Naver's Acquisition of Wattpad in 2021 - In May 2021, Naver completed its acquisition of Wattpad (Canada) in a cash and stock transaction valued at more than US$600 million. Wattpad has now become one of the important subsidiaries of Naver's Webtoon Entertainment. Wattpad stories have found enormous success on screens and in bookstores, and hundreds of Wattpad stories have been published as books, or adapted for TV and film.

Monthly Active Users (MAU) - The company defines MAU as users based on each device logged in and each offering accessed from a single device and may include the same individual user multiple times if the user is logged in from multiple devices or if the user accesses multiple offerings from one device. As of the quarter ended March 31, 2024, the company's global MAU have stabilized to reach approximately 170 million.

By geographic regions, Korea, Japan, and Rest of World contributed 15%, 12%, and 73% of global MAU, respectively. The company's MAU reached 24.7 million in Korea, 21.1 million in Japan, and 123.2 million in Rest of World as of end of March 2024.