HYBE seeks fix for superstar conundrum with IPO and diversification
HYBE set a major milestone as the first entertainment company to list as a Kospi stock.
It continues to distinguish itself from the pack as it develops a strong brand identity and a unique strategy, according to analysts.
The K-pop shop — which develops, markets and manages BTS — went public as a Kospi stock on Oct. 15, 2020.
HYBE was formerly known as Big Hit Entertainment.
The company's market cap, which hit 8.3 trillion won ($6.6 billion) on the first day of trading, was bigger than that of the three other listed entertainment agencies combined. On the same day, SM Entertainment's market cap was 75 billion won, JYP Entertainment's 1.2 trillion won and YG Entertainment's 80 billion won.
HYBE traded at 300,000 won on Wednesday and had a 12.4 trillion-won market cap, up 55 percent since its initial public offering (IPO).
The other three listed agencies trade as Kosdaq stocks.
"Big Hit Entertainment's listing as a Kospi stock strengthened the position of entertainment stocks in the market in general," said Hyundai Motor Securities analyst Kim Hyun-yong.
Korea's first entertainment company to go public was SM Entertainment, which listed on Kosdaq in 2000. SM's initial offering price was 12,000 won, and its market cap totaled 40.2 billion won on the first day of trading.
JYP Entertainment and YG Entertainment entered the stock market a decade later.
YG Entertainment's first attempt for an IPO was rejected due to possible financial instability as members of Big Bang, a boy band, were facing the military service. The company made a Kosdaq debut on its second attempt in 2011.
It took three years for JYP Entertainment to go public on Kosdaq, from 2010 to 2013, as the company used a backdoor listing, acquiring an already listed company with its own stock and merging into it.
JYP Entertainment could not meet the listing standards due to the failure of Wonder Girls in the U.S. market and resulting losses.
The rise and fall of a star has a direct impact on an agency. Companies always have to prepare a follow-up act even when their top stars are at the height of their careers.
Agencies "have found it necessary to secure the funding through IPOs and to establish a business portfolio that can generate profit even when artists take a break," said a Hana Financial Investment researcher Lee Ki-hoon.
While JYP and YG tried to diversify their business models, SM focused on acquiring advertising and entertainment agencies, including SK Planet, FNC Add Culture and KeyEast Entertainment.
HYBE took a different approach.
January 2021, three months after the company went public, Big Hit Entertainment's Weverse took over Naver's V Live business. The company then announced a strategic partnership with Universal Music Group (UMG) to form a boy band and promote UMG's artists on Weverse. In March, Big Hit Entertainment changed its name to HYBE.
All of this happened within six months of the IPO.
"HYBE was recognized by the market by clearly positioning itself as a platform company," said IBK Securities analyst Lee Hwan-wook.
BY KIM YEON-JOO [email@example.com]