09/17/2020

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The World’s Biggest Boy Band Goes Public



BTS Popularity Rivals American Star Power

Despite working in an industry turned upside down by the pandemic, K-Pop sensation BTS has managed to keep the hits coming. The band’s management company, Big Hit Entertainment Co., went public on Thursday in South Korea. On the first day of trading, shares of the newly minted public company jumped over 90%, valuing the entity at $8.5 billion. For context, record label giant Warner Music Group (WMG) is worth $15 billion, but it’s several decades older than Big Hit Entertainment. Live Nation Entertainment (LYV), another powerhouse in the industry, is worth around $12 billion.

The IPO is well timed. In August, BTS landed its first English-only single, “Dynamite” on the Billboard Hot 100 chart. The song spent two weeks in first place, slipped briefly, then climbed back to the top spot again in late September. In 2019, when the band could still play concerts in sold-out stadiums, they generated $170 million from touring. The only American band to make more money on tour was Metallica.

Investors both big and small saw those numbers and jumped. Small traders ordered 600 times more shares than were available to them, and the big investment firms ordered 1,100 times the shares reserved.

Young Investors Lead the Way

The South Korean stock market has been buoyed this year by an influx of hundreds of thousands of new investors. Interestingly, they’ve been inspired by YouTube stars. Currently, many young people feel disheartened by their financial prospects and the sputtering economy. Online personalities have talked up investing as a way to earn and save on top of their day jobs.

Big Hit Entertainment’s successful IPO also fits into a larger trend taking place in South Korea and around the world. After a lull, just like in the US, startups in South Korea have been looking to capitalize on a wave of investor interest. For instance, when videogame company Kakao Games Corp. launched its IPO in September, shares quickly doubled in price and hit the daily limit on the first trading day.

Some think the market may be getting ahead of itself. An analyst from Meritz Securities said the hot South Korean stock market is driving entertainment stock prices too high.

Awaiting Concerts—and Military Service

Despite BTS’s global popularity, Big Hit Entertainment’s business model is causing some to worry, mostly because of its virtually singular revenue source. In the first half of 2020, BTS comprised almost 90% of Big Hit’s sales—a big risk if BTS’s popularity cools before the company can secure stars of equal size. Investors are banking on sold-out concerts after the pandemic ends.

BTS could also be forced to hit pause soon, as the members will have to participate in 18 months of military service, which is mandatory for most South Korean men. Hopefully for Big Hit, BTS, and new investors, that pause will come after the band makes a triumphant return to the post-pandemic stage.


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