K-pop stars see huge capital gains from stock options

Executives and employees of top K-pop agencies such as SM Entertainment Co. and YG Entertainment Inc. are expected to earn huge capital gains from the companies’ stock options thanks to soaring stock prices. Some top South Korean entertainers including BoA and Kangta have yielded hundreds of millions of won in profit from stock options in the companies they signed with.

SM granted a total of 432,000 shares in stock options to its 165 executives and employees in March 2018. Each person received an average of 2,617 stock options, and the exercise price of the option was 42,640 won ($36.4).

On Oct. 27, SM shares closed at 83,100 won, nearly doubling the stock option price. If all of the stock options were sold at the closing price of the day, the average capital gain per person would have reached 105.9 million won. 

BoA, Asia’s top singer and also a non-registered director of SM, has realized a capital gain of 105.6 million won by disposing of 4,800 shares from her 6,000 stock options in August and earlier this month. The selling prices per option were between 62,494 won and 76,106 won.

Kangta, a K-pop singer and another non-registered director of the entertainment agency, raised a valuation gain of 242.8 million won based on the Oct. 27 closing price. He hasn’t yet exercised his 6,000 stock options.

The majority of the SM stock options are assumed to have been exercised during the third quarter amid the soaring prices, given that 316,500 shares out of total 432,000 stock options hadn’t been exercised by the second quarter this year.  

YG, another top entertainment agency managing Black Pink and Big Bang, granted its 107 executives and employees an average of 2,177 stock options per person in March of last year. The exercise price then was 25,404 won, about one third the current share price, and the price-earnings ratio is over 180% now.

While the average valuation gain per person is currently 100.4 million won, YG’s Chief Executive Officer Hwang Bo-Kyung realized 2.4 billion won in 2012 and 1.8 billion won in 2015 from selling her stock options.

JYP Entertainment Corp., another top agency for many K-pop groups such as Twice and Itzy, has given each 15,000 stock options to both 2PM’s Nichkhun and Junho but not to all its employees. The stock options, of which the exercise price is 41,994 won, can be exercised from October 2023.

JYP's share price closed at 53,600 won on Oct. 27 surpassing the break-even point.  

Write to Ui-Myung Park at uimyung@hankyung.com
Jihyun Kim edited this article.