The world’s biggest boy band has unleashed a hit IPO.
Big Hit Entertainment Co., the management company behind South Korean pop sensation BTS, made its market debut Thursday, capitalizing on the global buzz about South Korean pop culture and a local fervor for investing.
Shares in Big Hit roughly doubled from their initial public offering price by early afternoon in Seoul, lifting the company’s value to the equivalent of about $8.5 billion on a fully diluted basis. For comparison,
Warner Music Group Corp.
, one of the world’s largest record labels, is worth nearly $15 billion and concert specialist
about $12 billion.
Investor orders for the IPO hugely exceeded the shares on offer, even though the coronavirus pandemic has upended the global live-music business this year, and despite the fact that Big Hit’s financial fortunes are tightly bound to its star act, the seven-man BTS.
The deal, which priced late last month, raised about $840 million. An investment banker on the deal said that while investors had some reservations about the deal’s price, they were persuaded by BTS’s global prospects, especially when concerts resume. “Only a few artists in the world can sell out concert stadiums across major cities globally. BTS is one of them,” he said.
In August, BTS became the first all-Korean band to top Billboard’s Hot 100 chart, with its first single entirely in English, “Dynamite.” Forbes says the band took in $170 million on the road in 2019—more than any American band except Metallica. It ranked the group 47th on its Celebrity 100 list for 2020.
Big Hit is an unusual investment proposition. The IPO prospectus warns that BTS made up nearly 88% of all its revenue in the first half of this year, making the company especially vulnerable should the band fall from favor.
The listing document also highlights how 18 months or more of military service—mandatory for most South Korean men—could “disrupt the cohesion and commercial longevity” of BTS and the other boy bands it manages. Political tensions are another potential headache. Recent remarks by BTS about the Korean War angered some online commenters in China.
Big Hit and most other entertainment agencies in South Korea discover talent at an early age and take them through a yearslong trainee system, spending up to $100,000 a year on each potential future star, according to reports cited in a recent Harvard Business School paper.
As well as training in areas such as singing and dancing, Big Hit’s regimen extends to mental care, physical care and a mentorship program, the Harvard Business School paper said, citing Big Hit founder Bang Si-Hyuk, who is the company’s chairman and chief executive.
A wave of young individual investors has entered South Korea’s stock market this year. Their buying power has helped power IPOs for companies like
Kakao Games Corp.
, the gaming unit of
, which operates the country’s dominant messaging app.
Mom-and-pop investors placed orders totaling more than 600 times the Big Hit shares reserved for them, while institutional investors placed bids topping 1,100 times the shares they were offered, according to bankers on the deal. The IPO was priced at 135,000 won a share, the equivalent of about $118.
Big Hit is joining its smaller rivals
JYP Entertainment Corp.
YG Entertainment Inc.
SM Entertainment Co.
, in securing stock listings. Those companies manage K-pop bands like Blackpink, Twice and Girls’ Generation.
Hyo Jin Lee, an analyst at Meritz Securities, said South Korean entertainment stocks have become too pricey and the market was already pricing in higher concert revenues after coronavirus vaccines become widely available.
—Eun-Young Jeong contributed to this article.
Write to Frances Yoon at [email protected]
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