Regardless of disruptions to the music business brought on by the coronavirus pandemic, Big Hit Leisure, the administration firm behind Ok-pop superstars BTS, had a booming 2020. Final yr noticed BTS totally penetrate the U.S. music market, touchdown a No. 1 on the Billboard Sizzling 100, huge YouTube tallies, a Grammy nomination and swift album gross sales.
In the case of hit single, “Dynamite,” its detonation aligned completely with BHE’s profitable preliminary public providing (IPO) in mid-October 2020. Shares had been supplied at the prime finish of projections, at KRW135,000 apiece, valuing the firm at KRW 4.8 trillion ($4.36 billion at Jan. 2021 change charges). The sale enabled it to lift $875 million (KRW963 billion) of recent capital.
Funds and institutional traders subscribed for 1,100-times greater than the quantity of inventory that was obtainable to professionals. Whereas Korea-based retail traders utilized for 600 occasions greater than the portion that was allotted to them.
These punters who had been fortuitous sufficient to get on board at or earlier than the inventory launch had been capable of share a few of BHE’s fortunes and loved spectacular early beneficial properties.
However the secondary marketplace for BHE shares has been extra of a curler coaster.
Propelled by the motion of annoyed establishments that had missed out, and by BTS followers who handled the inventory like a bit of merchandize value snapping up at virtually any worth, the shares soared in preliminary buying and selling. They closed up virtually double at KRW258,000 on the first day.
Chilly actuality set in as quickly as the following day, when the worth plunged to KRW199,000, some 23% decrease that their day one peak. The shares haven’t achieved these highs ever since and by the finish of October, had fallen all the manner again to KRW144,000 — barely above the IPO worth.
Since then, the inventory has regained a few of the floor it misplaced — it surged 11% on Friday (Jan. 21, 2021) to shut at KRW192,500.
At that worth BHE founder Bang Si-hyuk, who personally owns a 36% stake in the firm, is a nonetheless a multi-billionaire. And BTS band members have seen their private share allocations every improve in worth to $12 million (KRW13.2 billion).
Nonetheless, questions have arisen: specifically, how the unsophisticated retail traders — who equally piled in to 2020’s different Korean sizzling shares, Kakao Video games and SK Biopharmaceuticals — will fare if BHE doesn’t stay as much as the hype it has generated.
“The bankers did their job, however the IPO was most likely performed at too excessive a a number of,” one securities analyst tells Selection. “Institutional traders have taken obtainable income and bought on each lockup expiry.”
At launch, BHE’s worth to earnings a number of was over 70 occasions projected 2020 web earnings, far larger than the electronics, tech and heavy business firms which can be the bedrock of the Korean financial system.
For the three months to September (introduced in November) BHE confirmed a 54% year-on-year income achieve. However web income for the first 9 months confirmed the draining results of coronavirus, and solely improved 13% to $55 million (KRW60.4 billion).
The corporate will quickly have an opportunity to show its value when it publishes its 2020 annual figures.
Outwardly, BHE’s 2020 good fortunes seem to have lasted by the yr. It renegotiated its BTS administration contract simply earlier than the IPO. And with simply days to spare earlier than Jin, the oldest BTS band member, would have been drafted. (Korean regulation was modified permitting Ok-pop stars to hunt exemption from in any other case obligatory navy service.)
Fourth quarter earnings could possibly be spectacular. The fast post-IPO interval consists of BTS’s “Map of the Soul ON:E” on-line live performance in October which is estimated to have generated $35 million from the sale of practically 1,000,000 tickets, and revenues from the band’s “BE Deluxe Version” album.
However loads of pundits have requested whether or not it is smart for BHE to be rated larger than Korea’s three different main expertise companies, JYP Leisure, YG Leisure and SM Leisure, the latter of which is house to Lee Soo-man, who is taken into account the father of Ok-pop.
Compared with the different trio, which have bigger portfolios of artists, BHE appears to be like like a one-product firm. In any case, greater than 90% of its 2019 revenue got here from BTS — along with recorded music and merchandise, the group is amongst the top-selling touring acts in the world.
BHE’s makes an attempt to diversify, by the success of different bands comparable to Collectively X Tomorrow, and mid-year acquisition of Pledis Leisure, ought to start to point out its value after Q1, however the firm isn’t prone to shake off its BTS dependency simply but. Certainly, as BHE’s shares had been slumping, these of the different companies moved upwards, erasing a few of the valuation discrepancy. YG inventory, specifically, has gained floor, rising 20% since BHE’s buying and selling debut, whereas JYP improved by 10% and SM by 5%.
However there may be no doubting BHE’s vaulting ambition. The corporate is planning to maneuver out of its present headquarters in Seoul’s modern Gangnam district (made globally well-known by YG-promoted PSY) and into the newly-completed Yongsan Commerce Middle. To deal with rising employees numbers, BHE has leased the complete constructing, which reportedly has 26 flooring and 7 basement ranges.
And, in fact, there’s BTS’ return to the stage as soon as stay music returns.