Gravity Co., Ltd.. (ADR) (NASDAQ:GRVY)

Ppl are addicted to gaming

Yep, I agree that Gravity should be setting in shortly. But probably not the kind of gravity the company wants to see happen to this small stub. I get the feeling that people green thumbing this stock don’t understand it at all. I am not trying to be rude, but a close read of the 20-F (annual report for foreign entity) shows a much different story than their press releases. Again, I’ll give the readers a few of the items I am seeing and let them research the remainder on their own time.

“A significant portion of our revenues has been and is currently derived from a single online game product, Ragnarok Online, which was commercially introduced in August 2002 and is currently commercially offered in 81 countries and markets. We derived Won 14,803 million (US$12,660 thousand) in revenues from Ragnarok Online in 2015 and Won 15,985 million in revenues from Ragnarok Online in 2014, representing approximately 41.5% and 40.1% of our total revenues in 2015 and 2014, respectively. Ragnarok Online has been on the market for fourteen years and has reached maturity in most of our principal markets. The life cycle of an online game generally lasts between four and seven years, and online games typically reach their peak popularity within the first two years following their introduction, after which time the game’s usage gradually stabilizes and begins to decline over time.”

I am not sure how many people follow the gaming market but a game from August 2002 but the two notable video gaming systems on the market at that time were the original Xbox, the Nintendo Gamecube, and the Playstation 2. The popular games were some of the original Grand Theft Auto games. These are old systems compared to today’s standards and should speak to how OLD this revenue stream is for the company.

“None of our other online games to date has proven to be as commercially successful as Ragnarok Online, and none of our mobile games to date has achieved comparable commercial success. We stopped offering Steal Fighter and H.A.V.E. Online in February and March of 2014, respectively, after neither game achieved wide-spread popularity.”

For a video game maker to be successful, they need to have multiple successful launches. It’s obvious this company has been unable to accomplish this.

“As an ADS holder, we are not obligated to and we will not treat you as one of our shareholders and therefore, you will not have the rights of a shareholder. Korean law and our articles of incorporation govern the rights applicable to our shareholders. The depositary will be treated as the shareholder of the common shares underlying your ADSs. As a holder of ADSs, you will have ADS holder rights, which is governed by the deposit agreement among us, the depositary and you, as an ADS holder. Upon receipt of the necessary voting materials, you may instruct the depositary to vote the number of shares your ADSs represent.”

Um, what? You want me to buy shares but you won’t treat me as a shareholder? So, I have no rights whatsoever? Who would ever buy these shares with no rights?

“On April 22, 2015, we announced, as approved by our Board of Directors on the same day, the change of the ratio of our ADS to common share from four ADSs to one common share (4:1) to one ADS to two common shares (1:2), effective as of May 11, 2015, which had the effect of a 1-for-8 reverse stock split of our ADSs. As a result of this ratio change, the trading price of our ADSs increased and closed at $1.00 per ADS or more for a minimum of ten consecutive business days and we regained compliance with NASDAQ Stock Market Rules, as confirmed in writing by NASDAQ on May 26, 2015. However, we cannot give any assurance that we will continue to be in compliance with the NASDAQ Stock Market Rules.”

I might be wrong, but it sounds like the ADS shares were impacted but no reverse split took place with the Korean shares? Maybe I am wrong, but that is what it sounds like. There is so much bad here, I cannot believe anyone would risk their hard-earned money on this foreign entity.