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IPOs

Big Hit scores second-highest IPO subscription ever at $50.4 bn

Oct 06, 2020 (Gmt+09:00)

Big Hit Entertainment Co., the label behind global boy band sensation BTS, pulled in 58.4 trillion won ($50.4 billion) with shares oversubscribed by 607 times during the two-day subscription as part of its initial public offering, according to industry sources on Oct. 6.

It is the second-highest subscription amount to date, outperforming the 31 trillion won raised by SK Biopharmaceuticals Co. in June. Big Hit fell about 130 billion won short of surpassing Kakao Games Corp. which set a fresh record by raising a whopping 58.6 trillion won in September.

Big Hit is set to raise around 962.6 billion won through the IPO, just above SK Biopharm’s 959.3 billion won. The extra 27 trillion won raised by Big Hit in the subscription process could be attributed to abundant liquidity coupled with the current IPO hype in the market, according to the securities industry.

Further, Big Hit has become a household name thanks to the success of BTS, which may have further fueled investors’ participation.

“BTS’ fanbase Army appear to have participated -- just as game enthusiasts in their 20s and 30s flocked to Kakao Games’ subscriptions,” said a source from the securities industry, adding, “BTS’ global popularity likely played a substantial role in the successful subscription process.”
BTS music video (Courtesy of Youtube)
An investor will be issued a single share for about 41 million won ($35,430) in deposits. Based on the offering price of 135,000 won ($116), the share price may soar to 351,000 won ($303) if it debuts double the offering price and reaches the daily upper limit of 30% -- following the same path as SK Biopharm and Kakao Games.

However, it remains uncertain if investors can take home satisfying profit from the first day of listing given market corrections on US-based tech stocks’ steep dips alongside the impending US presidential election.

Also, Big Hit’s lock-up agreement ratio is relatively low, standing at 43.9% compared to SK Biopharm’s 81.2% and Kakao Games’ 58.6%, and the lock-up period is shorter, meaning there could be heavy dumping that leads to weak price flow.

Experts also say that the domestic market conditions may be a variable in Big Hit’s share price. Analysts from local brokerage firms have proposed Big Hit’s share price at a range between 160,000 won and 380,000 won.



The IPO comes after BTS became the first Korean group to reach the No. 1 spot on the Billboard Hot 100 list with their latest single “Dynamite.”

Members of BTS, Big Hit’s founder and Chief Executive Officer Bang Si-hyuk along with the company’s executives and employees are likely to pocket heavy gains through the IPO. Bang holds around 12.3 million shares, valued at around 1.6 trillion won based on the offering price. Each BTS member also received 478,695 common shares valued at around 9.2 billion won ($8 million) per person, which could reach up to 24 billion won if the share price doubles and hits the upper limit on the bourse.

Founded in 2005, Bang is the biggest shareholder in Big Hit with a 45.1% stake. Korean game company Netmarble is the second-biggest shareholder with 25.22%. Other majority shareholders include local private equity firm STIC Investments with a 12.24% stake, and China-based VC Legend Capital.

Big Hit is set to list on the Kospi on Oct.15, as the first entertainment company to debut on the main bourse. Based on the offering price, the company’s market capitalization will touch around 4.6 trillion won.

Write to Ye-jin Jun and Geun-ho Im at ace@hankyung.com

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