Baby Shark creator's shares collapse below IPO price after soaring in debut trading
A drop below the IPO price is a bad signal, but it's too early to blame the company itself, a South Korean broker said
The excitement around the South Korean studio Pinkfong, which created the most popular video in the history of YouTube "Baby Shark Dance", quickly faded: on the second day of trading after the stock exchange debut, the shares fell below the IPO price. Local broker Heungkuk Securities notes that the debut came at a bad time and urges not to jump to conclusions.
Details
Quotes of The Pinkfong Company at trading on November 21 in Seoul fell to 32.5 thousand won ($22.1), almost 15% below the price of the initial public offering (38 thousand won). The Baby Shark creator's shares debuted on the stock exchange on Nov. 18, rising more than 60 percent to 61,500 won ($42) amid a frenzy of investor demand that exceeded supply by hundreds of times. However, trading closed at 37,000 won on Nov. 19.
During the IPO, investors expected that the funds from the sale of shares and the status of a public company would turn Pinkfong into a new growth leader, Bloomberg writes. The optimism was supported by global interest in the Korean entertainment industry led by K-pop stars BTS and Blackpink. However, some market participants began to doubt the validity of Pinkfong's valuation and its ability to repeat its previous success, the agency notes.
What the analysts are saying
"Falling below the IPO price is definitely a bad signal," Bloomberg quoted Choi Jong Ken, an analyst at Heungkuk Securities in Seoul, as saying. "But it's only been four days and the debut came during a period of weak market conditions. It's too early to blame only the company itself," the expert added.
NH Investment & Securities calculates that Pinkfong listed at 25 times projected 2025 earnings per share, while the average Forward P/E multiple for peers is around 40.
What Pinkfong makes money from
At the heart of Pinkfong's business is the production of short viral videos for YouTube, streaming services, TV and apps. The company is looking to diversify its revenue and reduce its reliance on the Baby Shark brand by patenting other characters, including its Pinkfong fox mascot. As noted by studio head Kim Min-seok, this strategy is working: the Bebefinn music project has already surpassed the Baby Shark franchise in content revenue.
This article was AI-translated and verified by a human editor
