Shares in K-pop group BTS’ management label Big Hit drop after debut

In this news, we discuss the Shares in K-pop group BTS’ management label Big Hit drop after debut.

Shares of Big Hit Entertainment defied the pre-listing hype to plunge Thursday on their first day of trading, giving the executive label of South Korean superstar group K-pop BTS a market valuation of 8, 7 trillion won ($ 7.61 billion). Big Hit, which relies heavily on the boy group for its income, doubled its initial public offering price to debut at 270,000 won per share, for a valuation of 9.6 trillion won. Stocks jumped 30% in early trade before retreating.

Analysts said the stock’s closing price of 258,000 won, still around 90% above the IPO price, should be viewed as a more reasonable price based on fundamentals, rather than a price tag. sign of failure of listing. “The closing price is already around the average analyst target price for 2022, based on earnings growth estimates,” said Jina An, analyst at eBest Investment & Securities.

Volatility in early trades – Big Hit topped the daily turnover list with 1.94 trillion won in shares changing hands – was to be expected for such a large and high-profile list, he said. she adds. Analysts say Big Hit has a proven track record online, using Youtube, social media and online concerts to generate revenue since in-person performances were canceled due to the coronavirus pandemic.

But concerns persist about Big Hit’s reliance on its star artists, making earnings particularly vulnerable to any disruption in the production of key talent. BTS, which is hugely successful worldwide, accounted for 87.7% of the label’s revenue in the first half of 2020, according to a regulatory filing. “The industry is booming, but it is also very cyclical and is subject to a lot of fluctuations,” said Kim Hyun-yong, analyst at Hyundai Motor Securities, citing potential obstacles such as the country’s compulsory military service.

This service is looming for BTS, with the oldest member of the group currently required to register by the end of next year and the remaining six members over the next five years. Some lawmakers and fans have asked the group to receive a waiver or delay of the engagement of about two years, arguing that they are doing a lot for their country without wearing a soldier’s uniform.

Earlier this week, BTS faced a barrage of criticism in China after the group’s lead member made remarks about the 1950-53 Korean War. BTS-related social media posts from top brands including Samsung, FILA and Hyundai subsequently disappeared from Chinese e-commerce platforms. Thursday’s float made group members instantly multimillionaires, with each of the allotted shares worth 17.6 billion won ($ 15.39 million) at the closing price, but the BTS official Twitter wasn’t referring to the roster, instead focusing on the group’s victory at the U.S. Billboard Music Awards coinciding with Best Social Artist.

NEW ARTISTS? Analysts said BTS’s successful online gigs, and Big Hit’s unprecedented level of control over its revenue streams through its fandom platform Weverse, which distributes BTS content and sells merchandise, differentiates the label.

“While offline gigs are not possible at the moment, Big Hit’s results in the first half of this year show that both content and merchandise have paid off; it was hardly affected over a year, ”said Nam Hyo-ji, analyst at KTB Investment & Securities. Big Hit Founder and Co-CEO Bang Si-hyuk said the company will continue “to research, challenge, discover innovative business models and apply them to continue to grow in the global market.” .

The listing has helped intensify IPO activity in South Korea, with volumes rising 51% to $ 2.9 billion so far this year, compared to the same period last year, according to data from Refinitiv. The pipeline looks strong after government stimulus measures to stimulate the economy amid the coronavirus pandemic that has flooded markets with liquidity, analysts said. Online game developer Krafton and KakaoBank, the mobile banking of the chat app operator, KakaoBank, have both started preliminary registration processes.

($ 1 = 1,144.8900 won)

News Highlights:

  • Big Hit Entertainment shares defied the pre-listing hype to plunge Thursday on their first day of trading, giving South Korean superstar K-pop’s management label BTS a market valuation of 8.7 trillion won ($ 7.61 billion).
  • Shares of K-pop group BTS’s Big Hit management label tumble after debut
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