Trap for fans
All seven members of BTS became multi-millionaires after record label Big Hit Entertainment went public on the Korea Exchange a month ago. Before him, the studio gave them 68,385 shares each (0.2%). The demand of retail investors exceeded the offered number of shares by 600 times, and institutional investors – by 1100 times. The shares were placed at the upper limit of 135,000 won ($115), in total, each musician ended up with a package worth almost $8 million.
Big Hit Entertainment raised $822 million in an IPO, the largest listing in South Korea since Celltrion HealthCare raised $850 million in July 2017. Big Hit Entertainment was valued at $4.1 billion, more than the capitalization of its rivals SM Entertainment ( $720 million), YG Entertainment ($900 million) and JYP Entertainment ($1.15 billion).
On the first day of trading on October 15, the share price jumped 91%. Big Hit Entertainment was only half the price of Warner Music Group. “Few musicians in the world can afford to gather entire stadiums in major cities around the world for their concerts,” one of the investment bankers involved in the IPO explained to Forbes. The magazine estimates that in 2019, BTS earned $170 million from touring, more than any American band except Metallica.
The quotes were largely dispersed by the group’s fans. They were the main victims of the hype. Institutional investors sold the lion’s share of their shares in the first two days, writes FT. From a peak of 351,000 won per share, they more than halved to 157,500 by the close of trading on November 12. “How can I get my shares back? I still have the check,” such messages flooded the forums of the band’s fans.
The actions of investors are quite understandable. Big Hit Entertainment has effectively bet everything on one group, with which it has a contract until 2024. Last year, BTS accounted for 97% of its revenue, in the first half of this year, 88%. Meanwhile, boy bands have a bad habit of losing popularity or breaking up. For example, after the mandatory military service for most Koreans, which lasts 18 months or more and which, most likely, musicians will have to go through before they turn 35 years old. Namjoon is now 26, the rest are about the same.