"The Pinkfong Company has built a foundation that lets it keep releasing new content."
Kim Min-seok, CEO of The Pinkfong Company, said at an initial public offering (IPO) press briefing held on the 3rd at the CCMM Building in Yeouido, Seoul, "Instead of waiting for broadcasters to buy licenses after we create content, we distribute it ourselves by using platforms such as YouTube."
The Pinkfong Company, a company specializing in educational content for infants and toddlers known for the YouTube children's song "Baby Shark," which begins with "Baby shark doo doo doo doo doo doo," has launched a bid to list on the KOSDAQ market with a target valuation of up to 545.3 billion won. It comes about 10 years after the initial release of the Baby Shark content in 2015.
The company plans to raise up to 76 billion won in this listing by offering all 2 million shares as new shares, backed by the successive success of new intellectual property (IP) content such as "Hogi" and "Bebefinn" following Baby Shark. Its market capitalization after listing is estimated at about 459.2 billion to 545.3 billion won.
Kim said, "All the IPs we rolled out after Baby Shark have succeeded not only in Korea but also in global markets," adding, "In particular, as the new IP Bebefinn gained popularity in 2022, revenue on a separate basis rose from 71.8 billion won in 2022 to 77.5 billion won last year."
According to Kim, The Pinkfong Company has even built a virtuous cycle that enables it to steadily introduce new IP. With its own app with a cumulative 530 million downloads and YouTube channels with a combined 290 million subscribers, it can cover production costs with content revenue alone.
He said, "Content companies typically make money by selling licenses to broadcasters and then selling merchandise (MD) based on the awareness expanded through broadcasts, but we are different," adding, "Content accounts for 67% of total revenue, and that keeps our margins high."
In fact, The Pinkfong Company recorded an operating margin close to 20% last year. On a consolidation basis, revenue came to 97.4 billion won and operating profit to 18.8 billion won. Thanks to a cost of goods sold of 21.3 billion won, the gross margin reached 78%. Selling and administrative expenses were 57.3 billion won, even higher than the cost of goods sold.
Kim also emphasized that the company has established a structure that enables repeated success with new IP. The key is so-called big-data-based IP production, which increases content accessibility by reusing popular songs from existing IP in new IP or by using characters within content as models for new IP.
Kim went on to say, "In fact, we are a different corporations from existing content corporations." Conscious of controversy over a high valuation that arose as famous Japanese animation companies were used as comparables for valuation, Kim said, "The Pinkfong Company also has the capability to generate exposure for its content on its own."
The company plans to continue expanding new IP while also releasing new IP favorable for MD planning to sustain revenue growth. In particular, it said it will use IPO proceeds to strengthen artificial intelligence (AI) capabilities to shorten the time to launch new IP and release new IP every year.
Chief Financial Officer Choi Jeong-ho of The Pinkfong Company said, "We recorded net losses on a consolidation basis in 2022 and 2023 due to deteriorating results at our Hong Kong toy subsidiary, but we sold that company and improved our financial soundness," adding, "From now on, revenue and operating profit will increase every year."
Meanwhile, The Pinkfong Company began a book-building process for institutional investors on the 28th of last month. After finishing book-building that day, it plans to set the offering price on the 5th. Subscriptions for retail investors are scheduled for the 6th to 7th. The lead managers are Mirae Asset Securities and Samsung Securities.