TikTok owner ByteDance in talks to invest $43 mn in Korea’s KidariStudio

South Korea’s online content platform KidariStudio Inc. will likely attract 50 billion won ($43 million) from China’s ByteDance Ltd., the developer of video-sharing social networking service TikTok.

According to investment banking sources on Monday, the two companies are in talks over the investment as ByteDance aims to leverage KidariStudio’s vast original webtoon and web novel content in its bid to enter the Asian online entertainment service market.

A KidariStudio official said the company is “working with ByteDance over the matter but nothing has been decided yet.”

A Chinese partially state-owned multinational Internet technology company headquartered in Beijing, ByteDance has been aggressive in its overseas expansion efforts to diversify its business portfolio.

Shares of KidariStudio finished up 7.14% at a record high of 18,000 won on the news, outperforming the broader benchmark Kospi index’s 0.1% rise on Monday.

Earlier in the day, the stock had risen by the daily limit of 30% to 21,800 won on a local media report that ByteDance’s investment could be as much as 550 billion won.

VAST ORIGINAL CONTENT

Established in 1987 as a content provider, KidariStudio entered the webtoon platform business by acquiring Bomcomics, the operator of webtoon platform Bomtoon, in 2017.

In 2020, the company acquired Lezhin Entertainment, a Korean startup that features Lezhin Comics, an online comics service for mature readers. Lezhin Comics has a particularly strong fanbase in North America and Japan.

Last year, it also unveiled a web novel platform Fanmurim.

Following a series of acquisitions, KidariStudio is currently Korea’s third-largest webtoon platform operator after two dominant players Naver Corp. and Kakao Corp.

As the holder of a number of webtoon and web novel intellectual properties (IPs) with the potential to be adapted into films and TV dramas, KidariStudio is well-positioned to benefit from the expanding market for content at home and abroad, analysts said.

KidariStudio managed to take a relatively early lead in the overseas market by acquiring France’s No. 1 webtoon platform Delitoon SAS in 2019. Delitoon offers Korean webtoons translated into French and German.

According to Kyobo Securities Co., the global digital comics market is forecast to grow to $3.3 billion by 2023 from $1.5 billion in 2015.

COVETED BY FOREIGN INVESTORS

Foreign investors have been actively pursuing Korean content providers as competition heats up among global over-the-top (OTT) service providers such as Netflix Inc. to release popular webtoon-turned Korean dramas on their platforms.

Last year, China’s tech giant Tencent Holdings invested about 100 billion won in Korea’s JTBC Studios Co., which oversees the production and sale of content to major OTT operators, including Netflix.

KidariStudio’s shares have been on the ascent since the August launch of Netflix's original series D.P., an immediate hit. The drama is based on the webtoon D.P. Dog’s Day, made by Lezhin Comics.

On the back of growing webtoon sales, KidariStudio’s operating profit rose to 12.9 billion won in the second quarter, up 12.5% from a year ago. Revenue increased 167.5% to 31.3 billion won.

The company’s full-year sales and operating profit are forecast to more than double to 118.5 billion won and 12.9 billion won, respectively, according to market tracker FnGuide.

KidariStudio’s price-sales ratio (PSR), a valuation metric for stocks, is 4.4, lower than the multiple of around 15 for Toronto-based web novel platform Wattpad and US mobile fiction startup Radish Fiction. Earlier this year, Naver and Kakao acquired Wattpad and Radish, respectively, to strengthen their webtoon businesses.

“We are willing to raise our target price for KidariStudio if and when ByteDance’s investment is confirmed,” said Park Jeong-yeob, a Mirae Asset Securities analyst.

Write to Chae-Yeon Kim and Hyung-gyo Suh at Why29@hankyung.com
In-Soo Nam edited this article.