whacha, From 300 Billion Won Valuation to No Buyers

Watcha is struggling to find a buyer in its rehabilitation merger and acquisition process. The company once helped pioneer South Korea’s online video streaming market and even pursued an initial public offering. Now, however, its financial position has deteriorated to the point where the success of its sale remains uncertain. Some observers say Watcha could face bankruptcy if it fails to find a buyer in another sale attempt.

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According to industry sources, the final bid for Watcha failed to attract interest. CJ ENM and Kinolights, both of which submitted letters of intent during the preliminary bidding stage, did not participate in the final bid. CJ ENM decided not to pursue the acquisition after reviewing both business and financial factors. The Kinolights consortium is also known to have reached a similar conclusion.

Potential buyers appear to have been more concerned about Watcha’s financial burden and possible decline in value than its growth potential. Watcha’s key assets are subscription-based revenue and user data. If its user base shrinks, its revenue-generating capacity also declines.

According to WiseApp/Retail, Watcha had only 350,000 monthly users in February this year. That is less than half the level of Laftel, Aniplus’ animation-focused OTT service with 1.08 million users, and U+ Mobile TV, LG Uplus’ service with 790,000 users.

Watcha is also in a state of complete capital impairment, making it difficult to secure room for content investment. As of 2024, Watcha’s total equity stood at minus 87.5 billion won. Its cash and cash equivalents amounted to only 758.25 million won. Even if the company is liquidated, the value of its remaining assets is likely to keep falling over time. The currently discussed corporate valuation of around 10 billion won may still feel expensive to potential buyers.

That does not mean Watcha has no valuable assets. Founded in 2011, Watcha was one of South Korea’s first-generation OTT services. It helped open the domestic online streaming market before Netflix entered South Korea in 2016. Watchapedia, Watcha’s video content review and recommendation service, accumulated user preference data and became the foundation for the growth of Watcha’s OTT business. In 2022, Watcha was valued at around 300 billion won and pursued an IPO.

However, Watcha failed to properly join the content competition against larger OTT players such as Netflix, Tving, Coupang Play, Wavve and Disney Plus. The reason was a lack of capital. Unlike Tving under CJ ENM, Coupang Play under Coupang and Wavve under SK Square, Watcha did not have a large corporate parent. Nor could it mobilize global capital like Netflix or Disney. This ultimately led Watcha into rehabilitation proceedings at the request of investors.

“If the sale falls through, the court, the receiver and the sale adviser may consider issuing another notice or lowering the conditions,” said Kim Gwang-sik, an attorney at Chungchul Law Firm. “However, if no buyer ultimately emerges and standalone rehabilitation proves difficult, the court may terminate the rehabilitation process and move the case into bankruptcy proceedings.”