The size, pricing, and ultimate percentage of ownership to be sold in the public offering have not been determined, although the prospectus did indicate that after the offering, Webtoon Entertainment would remain controlled by Korean parent Naver, indicating that less than 50% of the company is being offered.
There’s a plethora of A-list banks lined up for the offering, with Goldman Sachs & Co LLC and Morgan Stanley the lead bookrunning managers; J.P. Morgan and Evercore ISI the active bookrunning managers; Deutsche Bank Securities, UBS Investment Bank, and HSBC the joint bookrunning managers; and Raymond James and LionTree the co-managers.
The financials show a large and growing content company that has yet to reach profitability. Sales in 2023 were a hefty $1.28 billion, up 19% from $1.08 billion in 2022. But Webtoon Entertainment lost $144.8 million in 2023, higher than the $132.5 million the company lost in 2022.
Some $63.4 million of that loss was an asset impairment writedown of Wattpad Webtoon Studios, Munpia, and Jakga Company. The impairment was due to delays in realizing synergies and returns from investments in content creation and IP adaption, the postponement of release for major works, and delay in web-novel video production, the company said.
The company did show a $6.2 million profit in Q1 2024, much improved from an $18.3 million loss in Q1 2023.
Based on the balance sheet, it’s time for Webtoon to raise money; cash was at $231 million at the end of 2023, under two years’ burn at the 2023 loss level, although the company is promising the burn will change.
In the prospectus, the company indicated that digital reading platform WattPad, which Naver acquired in early 2021 for $600 million and merged with Webtoon (see "The ‘Fan-to-Pro Pipeline Is Changing"), has been growing users without emphasizing revenues, and that would change in the future. Revenues at the core Webtoon business are also expected to grow, with minimal penetration in much of the world and greater monetization opportunities in its largest territories.
The prospectus also reveals how Webtoon’s three major revenue sources break down. In 2023, $1.03 billion was collected in fees paid by users to consume content, up 20.8% from 2022. Advertising was $145.5 million in 2023, roughly flat from 2022; and IP adaptation revenue was $108.3 million, up 31.4%.
Monthly active users were 170 million as of Q1, with roughly 7.7 million of those in North America. Monthly paying users in North America totaled 500,000, a number that very few print publications (other than Dav Pilkey’s) reach.
The percentage of users paying is highest in the platform’s oldest markets: 15.5% in Korea, 10.1% in Japan, and 3.2% in North America.
Webtoon had 1,854 employees worldwide as of the end of 2023.
The prospectus makes much of Webtoon’s relationships with, and compensation of, creators. In 2023, "professional" creators earned an average of $48,000 per creator, with the top 100 creators earning $1 million per year on average. Some 483 creators earned at least $100,000. Cumulative payments to creators since the company’s founding in 2017 total over $2.8 billion.
There are 24 million creators across Webtoon and Wattpad. Over one-half of Webtoon creators (not including Wattpad creators) are from Korea.
The top executives are making real money, with CEO and founder Junkoo Kim bringing down $10.3 million and COO and CFO David J. Lee earning $5.4 million in 2023.