Gravity falls to earth again!
The price of Gravity Ltd. (GRVY) stock has once again fallen to the same level as cash per share, so I’m a buyer again. If you’ll remember, I sold my position about 2 months ago for prices ranging from $3.00 to $3.45 a share (with an average price of $3.24). I had started that position in mid 2010 at prices ranging from $1.50-$1.70 and completed it last Fall for prices between $1.18 and $1.30. If anything, the operational situation today is better than it was when I started buying. Ragnarok 2 finally launched in Korea in February and will be introduced into first Japan then further abroad in the near future. Last quarter’s results were not bad with revenue increasing 15% YOY, though net income fell significantly due to an increase in marketing expenses associated with the introduction of Ragnarok 2. So what gives? Did everyone think that the impact of Ragnarok 2 would immediately translate into mucho Won to the bottom line, perhaps even without increased advertising? I certainly didn’t, and that’s why I sold out once the shares more than doubled between the Fall of 2011 and March 2012. After peaking at $3.47 in late March, the shares have gradually trended down and are now once again trading as if there was no upside beyond the $1.74 cash per share. That doesn’t make sense to me. I don’t know if the price will go lower from here. Mr. Market has shown that he is pretty crazy; Last Fall Gravity’s market capitalization was less than 2/3 of the cash it had in the bank! So I’m starting slowly and plan to grow the position if and when Mr. Market becomes even more manic.
Long Term Value Blog 
Have you been able to gain an impression of the gamers reception of Ragnarok 2? My perusal of reviews/forums suggests that fans are unhappy with the gameplay and graphics. My concern is that there was such a long delay between the successful Ragnarok and part II that they’ve lost the attention of the fickle gaming group, and because they took so long to build it the overall package is already obsolete. While it may trade at net cash, I’m not confident that management will not squander it in an effort to come up with the “next best thing”.
Seems like the average GRVY participant expecting over-the-top metrics is shunning it these days. The price along with the trading volume has been steadily falling in recent weeks without any significant change in the company’s fundamentals.
The uncertainty associated with the fate of Ragnarok 2 is being perceived by market as a risk…