Unlike SAMG Entertainment's share price, which more than septupled in the first half of this year (January–June), it has been sluggish recently despite the strength of the domestic stock market. The slowdown likely stems from concerns about weaker earnings and additional worries over an overhang (a large potential selling volume).
SAMG Entertainment shares closed at 54,800 won on the Kosdaq market on the 12th. The share price fell 0.74% (400 won) from the previous day. It has moved sideways for 10 trading days at about half of the all-time high set in June.
SAMG Entertainment is a company specializing in 3D animation production that opened in 2000. It holds "Catch! Teenieping" and "Love Hachuping," which rode a wave of popularity, as major intellectual property (IP). Buoyed by the animation's popularity, SAMG Entertainment's share price also soared. It jumped from 12,740 won to an intraday 99,400 won on Jun. 25.
But the heat quickly cooled as sell orders emerged. According to the Financial Supervisory Service's electronic disclosure system (DART), Morgan Stanley & Co. International plc, an asset management arm of global investment bank (IB) Morgan Stanley, disclosed that as of Jun. 17 it held 463,023 shares (5.28%) of SAMG Entertainment, but after continued on-market selling, its holdings fell to 401,793 shares (4.55%).
JPMorgan also saw its SAMG Entertainment holdings fall from 455,757 shares (5.16%) on Jul. 23 to 321,267 shares (3.64%) on Aug. 13. Since there is no disclosure requirement below a 5% stake, both Morgan Stanley and JPMorgan may have sold additional shares.
The overhang burden is also persisting. Of the 30 billion won in convertible bonds (CB) issued by SAMG Entertainment in 2023, holders exercised conversion rights on 15.4 billion won worth into shares on the 18th of last month. That amounts to 643,724 shares, or 7.28% of the total number of shares outstanding. The conversion price is 23,923 won, and the shares were listed on the 5th. Simply put, a large volume hit the market that can be sold at a 129% return based on the current share price. About 610,000 shares (6.9%) remain eligible for conversion.
In addition, SAMG Entertainment executives and employees, including Chief Financial Officer (CFO) Yun Won-gi, exercised 98,700 stock options on the 8th. That represents 1.04% of the total number of shares outstanding, and the exercise price is 5,600 won, only one-tenth of that day's closing price. The new shares are scheduled to be listed on the 26th. The remaining stock options total 417,800 shares.
To make matters worse, earnings sank. SAMG Entertainment posted sales of 35.5 billion won and operating profit of 5.4 billion won in the second quarter (April–June) this year. That not only fell short of brokerage forecasts (sales of 36.4 billion won, operating profit of 6.4 billion won) but also declined from the first quarter (January–March) in both sales and operating profit.
Results are expected to slow further in the third quarter (July–September). According to financial information provider FnGuide, brokerages expect SAMG Entertainment to post third-quarter sales of 26.8 billion won and operating profit of 1.1 billion won.
Investors who "bought" at the top are in distress. The average loss ratio of 3,483 SAMG Entertainment investors linked to Naver Pay's "My asset" service is 12.44%. It is estimated that more than 40% of investors are sitting on mark-to-market losses.
The prevailing view is that SAMG Entertainment ultimately has to break through this situation with results. The Teenieping IP itself is still considered strong. A content industry official said, "You could say the Teenieping fever has cooled a bit among the core audience of children, but once a mega IP is born, it lasts a long time," adding, "It does not appear that another mega IP has emerged to replace Teenieping."
There is also optimism that the mood could change as the year-end approaches. Kim A-ram, a researcher at Shinhan Investment & Securities, said in a report, "The fourth quarter, which is a traditional peak season for toys and is expected to benefit from the broadcast effect of the princess-themed animation 'Princess Catch! Teenieping,' is likely to deliver strong results."