K-pop band BTS’ label, Big Hit, is a smash with Korean investors

Big Hit Entertainment debuted at double its initial public offering (IPO) price on Thursday, valuing the management label of South Korean superstar K-pop group BTS at 9.6 trillion South Korean won ($8.38bn).

Shares of Big Hit, which relies heavily on the boy band for revenue opened at 270,000 won ($236) each, and were trading at 4 percent above the offer price by late morning in Seoul as investors sought a piece of the country’s largest stock listing in three years.

The listing is helping to revive the country’s IPO activity after two subdued years, with volumes rising 51 percent to $2.9bn so far this year, compared with the same period last year, according to Refinitiv data.

The pipeline looks strong 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 begun the preliminary process for listing.

The Big Hit float also made the seven members of BTS instant multimillionaires with each granted shares worth 18.5 billion won ($16m) at the debut price.

The Billboard Chart topping group, which has a huge global following, accounted for 87.7 percent of the label’s revenue in the first half of 2020, according to a regulatory filing.

Analysts say the company has proved itself extremely online savvy, using YouTube and social media for market infiltration since in-person performances were cancelled because of the coronavirus pandemic.

BTS’ first paid online concert in June earned a Guinness World Records title for the most viewers of a live-streamed performance, with an audience of 757,000 from 107 countries.

The label also has an unprecedented level of control over its revenue streams via its Weverse fandom platform that distributes BTS content and sells merchandise, which has the potential to draw in other artists.

Rocky road to success

The listing ceremony at the Korea Exchange (KRX), attended by Big Hit founder and co-CEO Bang Si-hyuk, was broadcast live on the label’s YouTube channel.

Big Hit Entertainment’s co-CEO Bang Si-hyuk, middle, had pledged in 2017 to double the company’s revenue every year, a promise he has kept [Bloomberg]

“Big Hit has a different business model than the other big three K-Pop labels, JYP, SM and YG ,” said Nam Hyo-ji, analyst at KTB Investment & Securities. “Although not completely free from the effect of COVID-19, it’s freer than other labels.”

Bang’s road to riches has not always been smooth.

Big Hit, which he set up in 2005 after a successful career as a music producer, almost went bankrupt in its early years. The agency’s first breakthrough came in 2009 when its 8Eight’s Without a Heart became a local hit.

BTS debuted in 2013, and in a 2017 interview with Bloomberg, Bang mentioned plans to take Big Hit public. At the time, he pledged he would double the company’s revenue every year, a promise he has since achieved.

Military service debate

South Korean retail investors earlier this month laid out 58.4 trillion won ($51.1bn) in orders for Big Hit shares, falling just short of a record 58.55 trillion won ($51.2bn) for the retail portion of Kakao Games’ listing in September.

Thursday’s listing coincided with the United States’ Billboard Music Awards taking place in Los Angeles, where BTS won the first of two awards it was nominated for – Top Social Artist.

Back home, calls are mounting for BTS members to be granted alternatives or delays to South Korea’s mandatory military service, with some MPs and fans arguing they are doing plenty for their country without wearing a soldier’s uniform.

Under general rules, the eldest member of the band will be required to sign up by the end of next year, with the remaining six over the following five years.