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Big Hit, which relies heavily on the boy band
for revenue, doubled its initial public offering price to debut
at 270,000 won per share, for a 9.6 trillion won valuation.
Shares surged by as much as 30% in early trade before dropping
back.
Analysts said the closing share price of 258,000 won, still
around 90% above the IPO price, should be viewed as a more
reasonable price based on fundamentals, rather than a sign of
listing failure.
"The closing price is already around analysts' average target
price for 2022, based on estimations of profit increases," said
eBest Investment & Securities analyst Jina An.
Volatility in early trade - Big Hit topped the daily turnover
list with 1.94 trillion won worth of stock changing hands - was
to be expected for such a large, high-profile listing, she
added.
Analysts say Big Hit has proved itself online savvy, using
Youtube, social media and online concerts for revenue generation
since in-person performances were cancelled because of the
coronavirus pandemic.
But concerns continue about Big Hit's reliance on its star
artists, which makes revenue especially vulnerable to any
disruptions in output from key talent. BTS, which has a huge
global following, accounted for 87.7% of the label's revenue in
the first half of 2020, according to a regulatory filing.
"The industry is booming, but it's also very cyclical, and
undergoes a lot of fluctuations," said Kim Hyun-yong, analyst at
Hyundai Motor Securities, citing potential obstacles such as the
country's mandatory military service.
That service is looming for BTS, with the eldest member of the
band currently required to sign up by the end of next year and
the remaining six members over the following five years.
Some lawmakers and fans have called for the band to receive an
exemption from or postponement of the roughly two-year
commitment, arguing they are doing plenty for their country
without wearing a soldier's uniform.
Earlier this week, BTS faced a barrage of criticism in China
after the band's lead member made remarks about the 1950-53
Korean War. BTS-related social media posts of big-name brands,
including Samsung, FILA and Hyundai, subsequently disappeared
from Chinese e-commerce platforms.
Thursday's float made the band members instant
multimillionaires, with each granted shares worth 17.6 billion
won ($15.39 million) at the closing price, but BTS' official
Twitter account did not reference the listing, focusing instead
on the group's win at the coinciding U.S. Billboard Music Awards
for Top Social Artist.
NEW ARTISTS?
Analysts said BTS' successful online concerts and Big Hit's
unprecedented level of control over its revenue streams via its
Weverse fandom platform that distributes BTS content and sells
merchandise, differentiate the label.
"Although offline concerts are impossible for the time being,
Big Hit's results in the first half of this year show that the
content and merchandise made profits; it was hardly affected
on-year," said KTB Investment & Securities analyst Nam Hyo-ji.
Big Hit founder and co-CEO Bang Si-hyuk said the company would
continue "to research, challenge, discover innovative business
models, and apply them to continue to grow in the global
market."
The listing added to heightened IPO activity in South Korea,
with volumes rising 51% to $2.9 billion so far this year,
compared with the same period last year, according to Refinitiv
data.
The pipeline looks solid after government stimulus to boost the
economy amid the coronavirus pandemic flooded markets with cash,
analysts said. Online game developer Krafton, and chat app
operator Kakao's mobile banking unit KakaoBank have both begun
preliminary processes for listing.
(Reporting by Joyce Lee, additional reporting by Gaurav Dogra in
Bangalore, Choonsik Yoo, Hyunjoo Jin and Heekyong Yang in Seoul;
Editing by Tom Hogue and Jane Wardell)
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