Shares in Big Hit Entertainment, the music agency behind K-pop superstars BTS, surged on their stock market debut as retail investors flocked to South Korea’s largest initial public offering in three years.
Big Hit’s shares jumped by as much as 160 per cent from their IPO price to Won351,000 in early trading in Seoul on Thursday, pushing the company’s market value to Won9.6tn ($8.4bn). The shares ended trading about 90 per cent higher.
The high-profile listing came as the South Korean boy band achieved their second number one on Billboard’s main singles chart this week with the hit song “Savage Love”. The group’s first English language release, “Dynamite”, last month became the first South Korean song to top the US Billboard Hot 100, which ranks music releases based on sales and radio air time.
Nearly 1m viewers from 191 countries watched a two-day, BTS live-streamed concert in Seoul last weekend, according to Big Hit, with coronavirus having forced the act to cancel in-person performances.
Big Hit’s IPO last month was heavily oversubscribed by both institutional and retail investors, spearheaded by a huge global fan base for the world’s biggest boy band in terms of revenue generated. Mom-and-pop investors made bids of more than Won58tn for shares as legions of BTS fans, nicknamed the “Army”, took part in the IPO in a show of loyalty.
However, analysts said gains for Big Hit’s share price could be capped by their high valuations. The stock trades at 60 to 70 times its projected earnings for 2021, compared with between 22 and 45 times for rival South Korean entertainment groups and just six times for Samsung Electronics, the country’s biggest company.
“The global influence of BTS was vindicated by the IPO’s popularity but investors are keen to take profits as the stock price seems to have overshot its fundamentals,” said Lee Jin-man, an analyst at SK Securities.
The listing has made Big Hit’s founder and biggest shareholder, Bang Si-hyuk, a billionaire and the seven members of BTS multimillionaires. Mr Bang, who owns 43 per cent of the group, founded Big Hit in 2005 after a stint as a music producer at JYP Entertainment, one of South Korea’s three biggest record labels.
The company struggled to stay afloat in its first few years before registering its first local hit, “Without a Heart” by 8Eight, in 2009. BTS, who debuted in 2013, gained global attention for their online presence on YouTube and social media.
The company has diversified its revenue streams, including by distributing BTS content and selling merchandise through its Weverse platform.
Big Hit relies heavily on BTS, who generated nearly 90 per cent of its first-half revenue. Concerns over mandatory conscription of the group’s members to South Korea’s military are easing as Seoul plans to allow globally recognised pop artists to postpone their service, saying they contribute to raising the country’s standing abroad.
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