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Big Hit's downfall unnerves investors

Seen above is a stock trading board in Seoul, which shows a fall of Big Hit Entertainment's stock value, Friday. The music label went public Thursday with much fanfare, but reported drops for two consecutive days. Yonhap
Seen above is a stock trading board in Seoul, which shows a fall of Big Hit Entertainment's stock value, Friday. The music label went public Thursday with much fanfare, but reported drops for two consecutive days. Yonhap

By Lee Min-hyung

Retail investors who jumped on the latest public subscription craze regarding the listing of Big Hit Entertainment are feeling a growing sense of anxiety, after the entertainment stock saw a steep fall following its initial public offering (IPO).

The much-anticipated IPO of Big Hit attracted the attention of investors amid hopes for the stock to continue a winning streak on its global sensation BTS. Big Hit is the music label behind the mega-hit idol group.

But Big Hit's shares failed to meet the initial expectations from investors, as it showed signs of a steep downward adjustment only a day after its listing, Thursday.

Bit Hit went on a two-day decline in its stock value from Thursday when it closed at 258,000 won ($225), down by 4.44 percent from its opening price. But it failed to recover and declined further to close at 200,500 won Friday, a drop of 22 percent from the previous day. This raised individual investors' concerns over the overvaluation of the stock due to the BTS effect.

On Thursday, foreign and institutional investors went on a selling spree of Big Hit shares. They sold shares worth 42.2 billion won and 56.4 billion won respectively, while retail investors purchased Bit Hit shares worth 265.3 billion won the same day.

The listing of Big Hit was the third in a series that has sparked a local IPO craze following those of SK Biopharmaceuticals and Kakao Games. The two companies also went public with much fanfare, creating a nationwide craving for the public subscription of shares.

The two stocks reported growth shortly after the listing, but have since continued on downward paths due to their overvaluation buoyed by pre-IPO expectations.

But the decline in the stock price of Big Hit came faster than that of the previous two, due to what is widely seen as a "learning effect" from the cases of the SK and Kakao affiliates. The stock price of SK Biopharmaceuticals hit a new high for three days after its listing, and that of Kakao Games also hit a ceiling for two days after it went public last month.

As of Friday, the market capitalization of Big Hit came in at 6.78 trillion won, surpassing the combined valuation of the nation's other three influential music labels ― SM Entertainment, YG Entertainment and JYP Entertainment.

But market analysts remained optimistic over Big Hit's stock valuation growth due to its global fandom business led by BTS.

"Any subsiding signs of the coronavirus spread will allow the firm's major artists to resume their activities, so Big Hit's net profit is expected to top 100 billion won in 2021," Ahn Jin-ah, an analyst at eBest Investment & Securities, said. "We estimate Bit Hit's target corporate value to rise to 7.16 trillion won."



Seen above is a stock trading board in Seoul, which shows a fall of Big Hit Entertainment's stock value, Friday. The music label went public Thursday with much fanfare, but reported drops for two consecutive days. Yonhap
Seen above is a stock trading board in Seoul, which shows a fall of Big Hit Entertainment's stock value, Friday. The music label went public Thursday with much fanfare, but reported drops for two consecutive days. Yonhap

By Lee Min-hyung

Retail investors who jumped on the latest public subscription craze regarding the listing of Big Hit Entertainment are feeling a growing sense of anxiety, after the entertainment stock saw a steep fall following its initial public offering (IPO).

The much-anticipated IPO of Big Hit attracted the attention of investors amid hopes for the stock to continue a winning streak on its global sensation BTS. Big Hit is the music label behind the mega-hit idol group.

But Big Hit's shares failed to meet the initial expectations from investors, as it showed signs of a steep downward adjustment only a day after its listing, Thursday.

Bit Hit went on a two-day decline in its stock value from Thursday when it closed at 258,000 won ($225), down by 4.44 percent from its opening price. But it failed to recover and declined further to close at 200,500 won Friday, a drop of 22 percent from the previous day. This raised individual investors' concerns over the overvaluation of the stock due to the BTS effect.

On Thursday, foreign and institutional investors went on a selling spree of Big Hit shares. They sold shares worth 42.2 billion won and 56.4 billion won respectively, while retail investors purchased Bit Hit shares worth 265.3 billion won the same day.

The listing of Big Hit was the third in a series that has sparked a local IPO craze following those of SK Biopharmaceuticals and Kakao Games. The two companies also went public with much fanfare, creating a nationwide craving for the public subscription of shares.

The two stocks reported growth shortly after the listing, but have since continued on downward paths due to their overvaluation buoyed by pre-IPO expectations.

But the decline in the stock price of Big Hit came faster than that of the previous two, due to what is widely seen as a "learning effect" from the cases of the SK and Kakao affiliates. The stock price of SK Biopharmaceuticals hit a new high for three days after its listing, and that of Kakao Games also hit a ceiling for two days after it went public last month.

As of Friday, the market capitalization of Big Hit came in at 6.78 trillion won, surpassing the combined valuation of the nation's other three influential music labels ― SM Entertainment, YG Entertainment and JYP Entertainment.

But market analysts remained optimistic over Big Hit's stock valuation growth due to its global fandom business led by BTS.

"Any subsiding signs of the coronavirus spread will allow the firm's major artists to resume their activities, so Big Hit's net profit is expected to top 100 billion won in 2021," Ahn Jin-ah, an analyst at eBest Investment & Securities, said. "We estimate Bit Hit's target corporate value to rise to 7.16 trillion won."



Lee Min-hyung mhlee@koreatimes.co.kr


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