SAMG Entertainment Retreats Amid Overhang Concerns

622% Surge in First Half, Followed by 40% Drop in Second Half
Overhang Concerns from Convertible Bond Conversion
Investor Sentiment Expected to Recover Toward Year-End

The stock price of SAMG Entertainment, which saw a sharp rise in the first half of this year, has been retreating for several consecutive days. Concerns over an overhang (potential selling pressure) are weighing down the stock.

According to the financial investment industry on September 3, the stock price of SAMG Entertainment has fallen by 40% in the second half of this year. During the same period, the KOSDAQ index rose by 1.6%.

The stock price of SAMG Entertainment surged from around 12,000 won at the end of last year to 91,900 won at the end of June this year. From January to June, the stock price increased by 622%. The popularity of the animation "Catch! Teenieping" drove the growth of the character business. In the first half of this year, the company achieved consolidated sales of 71.1 billion won and operating profit of 11.6 billion won. Compared to the same period last year, sales increased by 43%, and the company turned to an operating profit.

Based on improved performance, the company's valuation rose rapidly, but the mood changed in the second half of the year. There was selling for profit-taking, and uncertainty about growth in the third quarter increased. More investors began to expect the growth rate to slow in the third quarter ahead of the year-end peak season. News of the exercise of conversion rights for convertible bonds (CB) issued to institutional investors two years ago also affected investor sentiment.

On August 18, SAMG Entertainment announced that some investors holding the second round of CBs had exercised their conversion rights. The conversion price is 23,923 won, and about 640,000 common shares will be listed on September 5. Given that the current stock price is 54,800 won, CB holders are expected to realize a return of over 100% in just two years.

Previously, in August 2023, SAMG Entertainment issued 30 billion won worth of CBs to secure funds for new business expansion and overseas business growth. The period for exercising conversion rights runs from August 18 this year to July 18, 2028. As the stock price surged this year, investors rushed to convert their bonds into common shares as soon as they became eligible. With the listing of shares equivalent to about 7.3% of the total issued shares approaching, concerns over an overhang have grown.

Kim Aram, a researcher at Shinhan Investment Corp., said, "For investor sentiment to recover, concerns over the convertible bond overhang need to be alleviated to some extent," adding, "The remaining amount that can be converted into shares by 2028 is 610,000 shares."

Although the stock price has fallen significantly from its peak, the possibility of investor sentiment recovering is expected to increase as the end of the year approaches. In the second half of this year, SAMG Entertainment plans to release major new titles such as "Catch! Teenieping" Season 6 and "Metal Cardbot" Season 3. The company is also preparing the second movie in the "Catch! Teenieping" series, following the film "Love's Hachuping."

Researcher Kim also predicted, "As IP recognition increases and buzz data accumulates, opportunities for collaboration will grow," adding, "The virtuous cycle of rising IP recognition and expanding collaboration opportunities could accelerate."

Lee Hyunji, a researcher at Eugene Investment & Securities, also forecast, "In addition to overwhelming growth in the kids' market, achievements based on overseas fandom will be added."