Big Hit Entertainment, home to megastars BTS, who recently climbed to the No.1 position on Billboard’s “HOT 100” list, is ready to officially start off preparations to go public!
On September 2nd, Big Hit Entertainment announced that their registration statement for listing under the Korea Composite Stock Price Index (KOSPI) was filed with the Financial Services Commission (FSC). According to a regulatory filing, the company will be offering 7.13 million newly-issued stocks, at the price range of 105,000 won through 135,000 won (approx. $88- $114). Making the total estimated sum between 748.7 billion won to 962.6 billion won (approx. $630.7 million- $811 million). The figures for the company’s estimated market capitalization amounts to a number between 3.55 trillion won and 4.57 trillion won (approx. $2.99 billion- $3.85 billion).
For my readers out there, let me help explain from the top. For a private company to go public refers to the process of selling shares to the public, which is the initial public offering (IPO). This is the transition of the company from private to public, thus becoming a publicly traded and owned entity. The KOSPI market is the main listing medium of the Korea Exchange (KRX). It is South Korea’s represented stock market index and is considered the equivalent of the United States’ S&P 500. Many large domestic and international companies such as Samsung Electronics, Hyundai Motor, KIA Motors, LG Electronics and POSCO are listed on KOSPI.
Back in May 27th, Big Hit Entertainment filed for the preliminary screening of IPO, which gained approval from the Korea Exchange (KRX) on August 7th KST. Unlike its peers who are listed under KOSDAQ (Korea Securities Dealers Association Quotations), Big Hit Entertainment was approved for listing under the main KOSPI market. According to the Korea Exchange (KRX), Big Hit’s IPO is arranged by NH Investment & Securities, Korea Investment & Securities, and JPMorgan Chase, with Mirae Asset Daewoo- Korea’s largest investment banking and stock brokerage company, as a joint underwriter.
On September 3rd, the Financial Supervisory Service’s Data Analysis, Retrieval and Transfer System (DART), revealed Big Hit’s IPO registration report including statements on BTS member’s military enlistment as well as the number of shares owned by the individual members.
The registration statement disclosed that Bang Si Hyuk, Big Hit’s founder and chairman-CEO, gifted the septet a total of 478,695 shares, which amounts to 68,385 shares each. The company stated that this gesture of gifting the members a part of the shares was a step to “strengthen their long-term cooperative relationship with the core artists and to boost high morale by sharing the results of the company’s growth.” With this, the members of BTS will not only be artists managed under Big Hit but will also partake in owning the company’s stocks.
If the IPO share price is set at the maximum, i.e. 135,000 won (approx. $114), then each member of BTS will own shares valuing 9.23 billion won (approx. $7.78 million).
With so much liquidity out there and so much momentum behind BTS, Big Hit Entertainment may end up pulling off Korea's biggest IPO in years. It's not chips, phones or cars anymore, but K-pop, games and pharmaceuticals that are fueling the market. https://t.co/QWe2juIPGR
— Sam Kim (@samkimasia) September 2, 2020
One of the concerns that drew most attention regarding Big Hit’s IPO, was the group’s eldest member Jin’s military enlistment. In the statement detailing the risks of investing in the company, Big Hit stated, “BTS consists of members born between 1992 and 1997 who are required to enlist as active-duty soldiers. It has been assessed that it will be possible for the oldest member Kim Seok Jin (Jin) to delay his enlistment until the end of 2021, based on the military service law.”
In addition, the company also expressed their plans to enable the artists to continue earning revenues through indirect sources when they are unable to promote. The company stated, “To prepare for the risk of the artists suspending their activities due to military enlistment, illnesses, or accidents, the company is continuing to expand the ratio of revenue earned through products, that do not require direct participation from artists, such as merchandise, licensing and video content. To minimize the risk of reduced sales due to our core artists’ impending hiatus from issues including military enlistment, we are reviewing a wide variety of business options such as pre-produced albums and video content as well as flexible operation of artists who are able to promote.”
On September 24th and 25th, Big Hit will proceed with the book building process, with the institutional investors from within and outside the country. The company will proceed to take the general subscriptions on October 5th and 6th, and are likely to complete the IPO listing process in the same month.
Earlier this year, SK Biopharmaceuticals Co. raised $784 million becoming the largest Korean IPO in three years. With an estimated initial price offering (IPO) of 962.6 billion won (approx. $811 million), Big Hit Entertainment might pull off what could be the largest Korean IPO.
As of the end of 2019, Bang Si Hyuk was the biggest shareholder of Big Hit Entertainment owning 45.12% shares, followed by the Korean gaming giant Netmarble Corp, headed by Bang’s cousin Bang Jun Hyuk, owning 25.1%.
Founded in 2005 by producer Bang Si Hyuk, Big Hit Entertainment currently houses a total of three artists- BTS, TXT and Lee Hyun. The company has been diversely expanding its multi-label structure through new ventures in recent years. Some of which being the launch of Weverse, a fan community platform developed and operated by Big Hit’s subsidiary beNX; the acquisition of multi-platform music game company Superb and entertainment company Source Music, which is home to girl group GFriend, all in 2019. In 2020, the company further acquired Pledis Entertainment whose current lineup includes groups Seventeen and NU’EST. Currently, Big Hit and CJ E&M‘s joint venture, BELIFT LAB is organizing a survival reality TV show I-LAND with plans to produce and launch a new boy group.
[Image credits to the owner]