South Korea's Naver-backed Webtoon shares jump about 14% in Nasdaq debut

By Arasu Kannagi Basil and Joyce Lee

(Reuters) -Shares of online comics platform Webtoon Entertainment rose as much as 14.3% above their initial public offering price in their Nasdaq debut on Thursday.

The stock opened at $21.30, giving the company a valuation of $2.71 billion, and traded as high as $24. It was last trading at $22.86 just after midday.

The company, backed by South Korean tech giant Naver, raised $315 million, selling 15 million shares in the IPO at the top end of its marketed range of $18 to $21.

The strong debut augurs well for companies looking to go public as the summer IPO market warms up to new issuers.

Los Angeles, California-based Webtoon is a storytelling platform that hosts thousands of stories spanning over 20 genres, including fantasy, romance, comedy and horror.

The company was founded in 2005 as a side project of CEO Junkoo Kim, then a search engineer at Naver.

Webtoon sold about 2.4 million shares to Naver at the IPO price in a concurrent private placement for proceeds of nearly $50 million.

Webtoons are digitally created short-form comics optimized for reading on mobile. The format, which began in Korea two decades ago, is cheap to produce and can be created by anyone with a tablet.

The format, which builds on a rich history of visual storytelling in Korea, has gained popularity globally following the success of K-pop, K-dramas and other Korean cultural exports.

Some of the popular webtoons include Lore Olympus - the romantic retelling of the Greek myth of Persephone - and The Sound of Your Heart, a semi-autobiographical story.

The company was already profiting in operating cash flow terms in 2023 and plans to use IPO funds to accelerate North America growth until webtoons have a standing there similar to South Korea or Japan in terms of user base and advertising revenue, Kim and Chief Strategy Officer Yongsoo Kim told reporters.

"Platform business takes up about 80% of our sales, advertising 10%, intellectual property business 10%. In all three areas, we have great room to grow," Yongsoo Kim said, referring to fees people pay to read the works, and revenue generated from converting webcomics or webnovels into different formats, such as a drama or movie.

Webtoon will also invest in technology such as artificial intelligence to ease content creators' workload and increase the variety of the works it hosts.

With 24 million creators having churned out 55 million episodes on its platform over the past decade, dozens of webtoons have been adapted into popular dramas and movies such as Hellbound, Bloodhounds and Sweet Home on streaming services including Netflix, Amazon Prime Video and Apple TV.

"We have an evergreen source of content," Yongsoo Kim said. "Given the creator base, the next Harry Potter, the next Pikachu... should originate from here."

(Reporting by Arasu Kannagi Basil in Bengaluru and Joyce Lee in Seoul; Editing by Tasim Zahid, Shinjini Ganguli and Josie Kao)