The listing price for Big Hit Entertainment was twice its issue price making it one of the most-successful public listings in the last three years.
After a massive IPO response last month from South Korean investors, shares of Big Hit Entertainment – the music label of K-pop superstars BTS – made a strong debut today on Thursday, October 15.
The Big Hit Entertainment shares opened at double its issue price. The issue price was 135,000 Korean won per share while the stock gave an opening at 270,000 Korean won per share. During the IPO, the company raised a whopping 963 billion won ($840 million). This made it the largest IPO in South Korea in the last three years.
Just before the trading started on Thursday, Big Hit valuations were 4.8 trillion won ($4.1 billion). this was more than the combined valuations of the three-biggest listed record labels in South Korea. This was all because of the massive rise of BTS which accounted for 97% of Big Hit’s sales last year. Speaking to CNBC, Daniel Yoo, head of global investment at Yuanta Securities Korea, said that South Korea’s entertainment sector is making a mark on the global scale.
“We think that the entertainment industry will be very important industry for Korea for investor(s) to invest,” Yoo said. However, he also admitted that the current valuations for Big Hit Entertainment “might be too expensive”. As noted Big Hit’s current dependency is entirely on the seven-member boyband BTS.
South Korea’s Entertainment Market and BTS’ Rise
Beyond-the-Scene (BTS) started in 2005 with the contribution of Bang Si-hyuk, popular as “hitman” Bang. Since its, debut, BTS has grown at a tremendous speed to become the country’s top band. BTS has also a massive fan-following overseas, especially in the United States.
It is also the first South Korean group to hit the top spot on the U.S. Billboard Hot 100 singles chart with the song “Dynamite”. K-Pop’s success has really transformed Big Hit’s fortunes. Over the last few years, Big Hit’s sales have skyrocketed to unprecedented highs. However, some analysts think that now it is a public listed company, too much dependency on one band isn’t good. Park Ju-gun, a business analyst from corporate analysis firm CEO Score, told CNN:
“Ninety percent of Big Hit Entertainment’s revenue is from BTS, so the risk is there. But it has started to shift its revenue structure to a multifaceted portfolio.”
Another major disruption for BTS could be South Korea’s compulsory military service rule for all healthy men below 28. This might create some headwinds for the band’s performance going ahead.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.