Shares in K-pop agency Big Hit Entertainment soared on their debut on Thursday, boosting the fortunes of its billionaire founder and the seven multimillionaire members of BTS, the world’s biggest boy band.
Shares in the management company – which makes most of its revenue from BTS – opened at 270,000 won ($235) in Seoul from an IPO offering price of 135,000 won per share and rose as much as 30 per cent, the upper daily limit.
That pushed Big Hit’s market value to 11 trillion won, more than the other three rival K-pop agencies combined.
Big Hit’s $820 million offering was South Korea’s largest in three years. The firm managed to thrive even as the coronavirus crisis forced it to cancel live concerts.
Investors piled into the IPO on the back of BTS's popularity from online performances and hit songs such as Dynamite, its first English composition.
With the surge in shares, Big Hit founder Bang Si-hyuk’s wealth reached $3.8 billion, one of the biggest fortunes in Korea. He shared his stake with BTS members, giving each of them 68,385 shares of the company in August – a stake valued at more than $20m at the stock's high.
Others at the agency were getting richer. A stock ownership association of employees subscribed to 1.4 million shares worth 499 billion won, meaning that each could own more than a million dollar stake if all 297 full-time workers excluding executives who were disclosed in July subscribed equally.
By law, companies in Korea are allowed to allocate up to 20 per cent of IPO stock to employees.
The firm also gave its workers and executives equity options. A Big Hit representative declined to comment on how many were given stock and options and in which amount.
Investors have reaped large gains from Korean listings recently, especially from companies benefiting from the flood of easy money during the coronavirus pandemic.
Big Hit's offering was more than 1,000 times oversubscribed by institutional investors, and more than 600 times by retail. This year, with the surge in trading as the virus kept people home, individual investors have taken over from institutional investors to account for the bulk of South Korea's stock market volume.
The other two large Korean IPOs this year – that of Kakao Games last month and SK Biopharmaceuticals, a biotechnology unit of chaebol SK Group, in July – were also heavily oversubscribed. Kakao Games drew 1,524 times the amount of stock available for retail investors and has doubled since the offering, while SK Biopharmaceuticals was 323 times oversubscribed and has tripled.
While BTS has been the key to Big Hit’s success, it is also the company’s major risk, with the band accounting for almost 90 per cent of its sales in the first half of the year.
The ages of its members are a growing concern as South Korea requires its male citizens between 18 and 28 to serve in the military for two years.
BTS’s oldest star, Kim Seok-jin, is 27. There is legislation with the nation’s parliament that if passed would allow entertainers who have made “great contributions” to popular culture to defer military service until they are 30, a move that would buy the band members time.
Another risk is that 30 per cent of the institutional investors who bought into the IPO can sell the shares after a month, when their lock-up period expires. For SK Biopharmaceuticals, its three-month lock-up led to a 10 per cent fall in the stock.
But K-pop companies have generally held up well, and the coronavirus crisis has proved that the industry’s global influence remains undiminished thanks to online concerts and album sales. Shares of Big Hit rivals YG Entertainment and JYP
Entertainment are both up more than 45 per cent this year. The stakes their founders own in their respective agencies are now worth millions of dollars. YG is behind Blackpink, the subject of a Netflix documentary this year.
Even with coronavirus making physical concerts impossible, BTS sales kept rising. An online concert last weekend on Big Hit’s mobile platform for fans drew as many as 993,000 viewers, according to local media.
The agency has also collaborated with companies to keep the group’s profile high. Samsung’s new smartphone is designed with BTS’s logo, and Fortnite, a role-playing game developed by US firm Epic Games, carried out a virtual dance party with the boy band late last month.
Bang’s road to riches has not always been smooth. Big Hit, which he set up in 2005 after a successful career as a music producer, almost went bankrupt in its early years.
The agency's first breakthrough came in 2009, when its 8Eight's Without A Heart became a local hit. BTS debuted in 2013, and in a 2017 interview with Bloomberg Bang mentioned plans to take Big Hit public. At the time, he pledged he would double the company's revenue every year, a promise he has achieved.
