Asia Tea Time - Cup 61 ☕

This week I talk Webtoon’s Nasdaq IPO, why chasing Nvidia might not be a great idea, and monitor lizards at home.

Macro in Asia

Korea’s Webtoon Entertainment raises US$315 million in US IPO

South Korean online comics platform Webtoon Entertainment raised US$315 million in an IPO that valued the firm at US$2.7 billion.

The company, which is owned by Korean tech giant Naver, has become a hit globally with its loyal fan base.

Why it’s happening

• Webtoon priced its IPO at the top of the indicated price range of US$18-21. It’s strong evidence of how hot Korean cultural exports are right now.

• If you want to carry out an IPO – where a company floats its shares for the first time – most companies aim to raise money in the US, the world’s biggest stock market.

• Webtoon aims to use the money raised from the IPO to expand its business in North America, with 7.7 million monthly users of Webtoon residing in the US. The company has a total of 170 million monthly active users worldwide.

Why it matters

• It’s another “win” for cultural exports from South Korea, adding online comics to the success stories of K-Pop and Korean films/dramas. 

• Naver still owns a 63.4% stake in Webtoon after its listing and the Korean tech conglomerate hopes to use Webtoon’s success to drive its global expansion.

What’s next?

• Watch for where Webtoon shares are six months or 12 months down the line. Hype surrounding an IPO can quickly fade when the realities of being a public company set in.

Tim’s Take 

We all know that Korean exports like Netflix’s Squid Game and K-pop phenomenon Blackpink have been at the forefront of pop culture globally.

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You can now add online comics to South Korea’s cultural armoury. The fact that Webtoon has around 170 million monthly active users globally is a remarkable achievement, even though 27% of that number is in Japan and Korea.

The appeal of the entertainment format isn’t only attractive for fans, it seems. Even BlackRock – one of the world’s largest asset managers – has indicated an interest in buying up to US$50 million worth of shares in the IPO.

In the end, the IPO was a modest success, with Webtoon listing on Thursday 27 June and finishing its first day of trading up 10%. It finished Friday down only 0.7%. As far as IPOs go, it seems to be a reasonable success.

However, the actual business continues to be loss-making, with Webtoon posting a net loss of US$145 million on US$1.28 billion of revenue for 2023.

Whether that will put off investors longer term is anyone’s guess but the trend of exporting Korea’s cultural champions seems to be going strong.

Tim's money tip of the week

Understanding the size of companies is critical when investing. Historically speaking, smaller companies (at least in the US) have produced better risk-adjusted returns for investors over the long term.

That’s when compared to large cap peers. Recently, though, news of the “Magnificent Seven” and their monster rally versus the rest of the stock market has dominated news.

More specifically, it’s been the crazy AI-fuelled rally in Nvidia that has got investors excited. The stock is up over 150% so far in 2024 and has increased 2,900% in the past five years.

But Nvidia is now worth just over US$3 trillion – one of the biggest companies in the world. Even if it could increase another 100%, it would be worth US$6 trillion – about 1.5 times the size of Germany’s annual GDP.

So, increasing that much off an already-large base does raise questions about how much more juice there is in the Nvidia rally longer term. 

It’s an exceptional company but that doesn’t automatically make it a great investment at its current price (or valuation).

That’s something worth considering when we look at chasing the rally in Nvidia shares. Rather, it might make more sense to get exposure to the overall semiconductor sector via one of the bigger chips/semis ETFs out there.

For investors interested in US ETFs, the go-to is the iShares Semiconductor ETF (NASDAQ: SOXX) or, if the UCITS route interests you as an international/non-US investor, then the VanEck Semiconductor ETF (LSE: SMH) could be an option. 

This still gives investors a stake in Nvidia but also broader exposure to the overall semiconductor industry, which will play a crucial role in the ongoing AI story.

Story of the week

A resident in the Punggol area of Singapore got a rude shock when they found that a monitor lizard had roamed into their 11th-storey flat.

The family ended up having to chase away the reptile with brooms before having to wait a few hours for a two-man team to arrive to capture it.

At 1.5 metres in length, it was no small gecko but the area’s waterways and forested areas can be home to all sorts of scary (or cute?) animals.