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SEOUL’s stock in Big Hit Entertainment defied pre-listing hype to fall on its first day of trading on Thursday, giving the management label of South Korean superstar K-pop group BTS a valuation of market of 8.7 trillion won ($ 7.61 billion).
Big Hit, which relies heavily on the boy band for revenue, doubled its initial public offering price to debut at 270,000 won per share, for a valuation of 9.6 trillion won. The shares rose as much as 30% in early trading before pulling back.
Analysts said the stock’s closing price of 258,000 won, still around 90% above the IPO price, should be seen as a more reasonable price based on fundamentals, rather than a sign of a listing failure. .
“The closing price is already around the analysts’ average target price for 2022, based on earnings increase estimates,” said eBest Investment & Securities analyst Jina An.
The volatility in early trading (Big Hit topped the daily turnover chart with 1.94 trillion won in shares changing hands) was to be expected for such a large and high-profile listing, he added.
Analysts say Big Hit has proven to be smart online, using YouTube, social media, and online concerts to generate revenue since in-person performances were canceled due to the coronavirus pandemic.
But concerns remain about Big Hit’s reliance on its star performers, making revenue especially vulnerable to any disruption in the production of key talents. BTS, which has a large following globally, accounted for 87.7% of the label’s revenue in the first half of 2020, according to a regulatory document.
“The industry is booming, but it is also very cyclical and undergoes a lot of fluctuations,” said Kim Hyun-yong, an analyst at Hyundai Motor Securities, citing potential obstacles such as the country’s compulsory military service.
That service is looming for BTS, with the oldest member of the band currently required to sign up by the end of next year and the remaining six members for the next five years.
Some lawmakers and fans have called for the band to receive a waiver or commitment deferral of about two years, arguing 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 main member of the band made comments about the 1950-53 Korean War. BTS-related social media posts from big-name brands, including Samsung, FILA, and Hyundai, subsequently disappeared from Chinese e-commerce platforms.
Thursday’s float turned the band members into instant billionaires, with shares awarded worth 17.6 billion won ($ 15.39 million) at closing price, but BTS’s official Twitter account did not reference the listing. , focusing instead on the group’s victory in the US Billboard Music match. Best Social Artist Awards.
NEW ARTISTS?
Analysts said that BTS’s successful online gigs and Big Hit’s unprecedented level of control over its revenue streams through its Weverse fan platform that distributes BTS content and sells merchandise set the label apart.
“Although offline gigs are impossible at the moment, Big Hit’s results in the first half of this year show that content and merchandise made a profit; they were hardly affected in the year,” said the KTB Investment analyst. & Securities Nam Hyo-ji.
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 marketplace.”
The listing added to increased IPO activity in South Korea, with volumes increasing 51% to $ 2.9 billion so far this year, compared to the same period last year, according to Refinitiv data.
The pipeline appears solid after government stimulus to boost the economy amid the coronavirus pandemic that flooded markets with cash, analysts said. Online game developer Krafton and chat app operator Kakao’s mobile banking unit KakaoBank have started preliminary listing processes. ($ 1 = 1,144.8900 won) – Reuters
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