D.he global success of the Korean pop group BTS gave the music agency Bit Hit Entertainment a glamorous debut on the Seoul stock exchange. The share was valued at 270,000 won (€ 200) when it went public, double the issue price of 135,000 won, and reached up to 351,000 won. In the course of trading, however, there were deadweight effects and perhaps it dawned on some investors that the success of Big Hit is currently based on only one musical group. At the close of trading, the price was 258,000 won below the cost price.
High turnover on the first day of trading
There was great interest in the share. According to the stock exchange in Seoul, more than half of the 10 million tradable shares changed hands on Thursday morning. The market value of the music agency rose at times to 11 trillion won (8 billion euros). Big Hit was worth more than the other three major Korean pop music agencies combined.
The IPO, which was drastically overshadowed by institutional and private investors, followed the steep rise of the boy band, which with “Savage Love” just reached first place on the American Billboard charts for the second time since August. BTS succeeded for the first time with the English song “Dynamite”. Before that, no South Korean group had made it to first place in the American rankings.
Private investors are particularly active
The agency Big Hit Entertainment also benefited from the IPO from the fact that private investors are particularly active on the stock exchange in South Korea this Covid year. The reason for this is believed to be that South Koreans are spending more time at home for fear of the virus. The major IPOs of Kakao Games and SK Biopharmaceuticals this year were also significantly oversubscribed.
The music agency’s biggest IPO in Seoul since 2017 brought in 963 billion won (€ 716 million). Big Hit’s 48-year-old founder Bang Si-hyuk, who owns 43 percent of the company, was valued at more than € 3 billion on the date of issue. The members of the group, to whom Bang had each given 68,385 shares in the company in August, became millionaires with a value of around 14 million euros each. Bang put the group together in 2013 and built it up over the years. In interviews, he attributes the group’s success to coincidence rather than to his long-term strategy. The music from BTS hits the zeitgeist of young people, he then says, for example.
Fans find online appearances
But in terms of business, Bang has done a lot right. Due to the corona crisis, the agency had to cancel live concerts this year, but still reached the large fan base of the seven musicians with online appearances. The online business with fan articles, which Big Hit controls on its own Internet platform, will not be affected by Corona either. The agency also makes money marketing the BTS name. Samsung Electronics, Hyundai Motor and the sports fashion brand Fila advertise with the group. For the music agency, BTS is both the greatest success and the greatest risk. In the first half of the year, Big Hit generated 88 percent of sales with the boy group.
However, the two-year military service, which is mandatory and strictly enforced in South Korea, hovers over the singing and dancing young men as a great risk. The oldest of the singers, Kim Seok-jin, is 27 years old and has to start military service by the end of 2021 at the latest. In the following five years, the other six members of the group are then due. They and Big Hit Entertainment may be helped by a bill that is currently being debated in parliament. According to this, outstanding artists who have made a special contribution to Korean culture are likely to postpone starting military service until they are 30 years old. This arrangement would make it easier for the music agency and BTS to benefit from the success in the years to come.
BTS causes a scandal in China
The music group is currently causing unrest in the Korean-Chinese relationship after a rather innocent remark by top man Kim Nam-joon, known as “RM”, met with displeasure in China. As part of an award ceremony with a view to the Korean War, Kim had declared that South Korea and the United States share a “history of suffering” and commemorate the victims of countless men and women. That didn’t go down well in China, which fought on the north side in the Korean War. As a result, there was much criticism of the Korean boy band on Chinese Internet services. As a result, messages from Samsung, Fila and Hyundai related to BTS disappeared on Chinese Internet sales platforms and on social networks such as Weibo. In recent years, other South Korean companies have come to know the Chinese propaganda power. Hyundai Motor cars were rarely bought and the Lotte retail group closed numerous supermarkets in China because they were boycotted.