South Korean company Big Hit Entertainment – best known as the home of the record-breaking septet BTS – went public on Thursday (Oct. 15), and it’s been a bit of a rollercoaster ever since with share prices soaring then dipping, but ultimately proved to be a sizable success for Big Hit.
Going public on South Korea’s KOSPI, Big Hit issued shares for 135,000 KRW (around $115 USD) – though they ultimately opened at 270,000 KRW –, raising 962.55 billion KRW ($822 million) and valuing the company at 5.8 trillion KRW ($4.1 billion). The immense valuation resulted in the seven members of BTS, who each have over 68,000 shares in the company that Bloomberg says is now worth $8 million per each member, and their producer, Bang Si-hyuk, is now worth around $1.4 billion.
The initial immense interest, however, fluctuated within its first week and surprised some investors; after closing on its opening day of Oct. 15 at 258,000 KRW per share (just under $225 USD), the valuation of shares dropped, with the company closing out the following day, Friday, Oct. 16, at 200,500 KRW (just over $175) a share. According to The Korea Herald, the plummet was caused as foreign and institutional buyers sold shares, even while retail investors – more general consumers – continued to invest and buy shares, helping Big Hit’s stock remain of high interest but volatile.
The dip has been blamed by some on Big Hit Entertainment being overvalued by underwriters, and for the company’s reliance on BTS as interest in the company is largely dependent on the success of the act, one of the biggest pop culture entities of this generation and the company’s main source of revenue for the past seven years. Though Big Hit has spent the past two years investing in other K-pop companies and launching new acts, along with diversifying its content through a series of tech and merchandising ventures, BTS was still responsible for almost 90% of BTS’s income in the first half of this year.
But Big Hit’s stock fluctuation, while ostensibly potential for a major loss in investment by many, is still worth well above its issuing price and is likely to stabilize in weeks to come as the frenzied heat of the opening dies down.
The volatility of Big Hit Entertainment’s stock within the first few days, and coming weeks and months, is unsurprising for anyone familiar with the world of K-pop investments: investing in South Korean entertainment companies is a tumultuous thing, given that public opinion often shifts in various directions and the worth of shares can oftentimes be directly correlated to things like the news that an artist under the company is dating or the announcement of an upcoming release. The current fluctuations, while unrelated to such issues, recall this industry standard: but in this case, it is Big Hit’s brand reputation, rather than that of individual artists’ or acts, that is the potential for investors waffling.
Big Hit Entertainment is currently one of the most valuable entertainment entities in South Korea, and the global media world at large, and is expected to be a major player in the industry for years to come. Last year alone, its operating profit outstripped the combined operating profit of, until Big Hit’s IPO, the most prominent publicly traded K-pop companies: SM Entertainment, YG Entertainment, and JYP Entertainment. Known collectively as the historic “Big 3” of the K-pop world, the three older companies have similarly seen shares fluctuate, with upticks in investments and downturns in selloffs directly correlating to various moments of public ups and downs. But Big Hit’s IPO was a unique moment of interest from both local and global investors into a South Korean entertainment company, betting big on Big Hit’s ability to continue to see immense success, both with BTS and other acts, even as changes are on the horizon. Most notably, BTS’s members will have to enlist in South Korea’s military in coming years as all able-bodied men are obligated to serve in the country’s armed forces for a period of about 1.5-2 years, due to the Korean War never having technically ended.
While this potential hiatus may impact of Big Hit’s largest money makers, investors still spent the IPO showing not only interest but support for the company. Fluctuations aside as the stock prices stabilize, both financial institutions and casual investors alike are betting on the company’s future ability to retain its place at the top of not only the South Korean entertainment industry but also amid the global media world. Though there is some concern that there will be more stock dumping in the near future if investors ultimately determine Big Hit is truly overvalued, general interest in the company and its media savvy is still high, and likely to continue as such. The IPO arrived just ahead of upcoming releases from not only BTS but also several other high-profile groups under the company, namely Seventeen, GFriend, and Tomorrow X Together, with each coming one after another as a potential reminder of what the company has to offer its investors by way of big entertainment content hits.
The year of 2020 has reminded the world that nothing is a sure bet. But BTS, and the entertainment powerhouse company behind the act, is one of those things that is as close you can get, even if it will take some time for Big Hit’s shares to stabilize as investors, not underwriters, ultimately determine the company’s worth. How these investments impact the future of the company is yet to be known. But even though there may be a ripple effect as investors prove to be either here or there, at the end of the day Big Hit has already come out on top with South Korea’s largest stock offering since July 2017, and the IPO’s impact is going to be felt on the company and the industry at large for some time.