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IPOs

BTS label Big Hit trims gains after strong debut

Oct 15, 2020 (Gmt+09:00)

Big Hit Entertainment Co., the label behind K-pop boyband sensation BTS, nearly halved its initial gains by the close of its first day of trading Oct. 15. Shares soared to their daily limit in early trade, but retail investors later cashed out of the stock amid valuation disputes.

The entertainment agency shot up by its 30% daily limit to 351,000 won ($306) just minutes after opening as it debuted on the Korea Stock Exchange. 

Yet the hype cooled almost too soon for what had been widely anticipated as South Korea's IPO blockbuster of the year, with the share price closing at 258,000 won, a 4.44% drop from the opening price of 270,000 won.

The reduced gains were at least partly attributed to the high offering price, which applied 42.36 times EBITDA, more than twice the average of listed entertainment companies in the country. The closing price also reflected weakened investor sentiment towards the broader index Kospi, which has been in boxed trade for the past few months. 

Based on the closing price, the company's market cap stands at 8.7 trillion won, putting it No. 33 on the Kospi. The share price also puts the value of each BTS member's shareholding in Big Hit to around 17.6 billion won ($15.3 million), making them multimillionaires.

Among those at Big HIt's Oct. 15 debut ceremony were JP Morgan Korea's CEO Park Tae-jin (far left), Big Hit Entertainment CEO Bang Si-hyuk (fourth from left), Korea Exchange Chairman Jung Jiwon (fourth from the right), and NH Investment & Securities CEO Jeong Young-chae (second from right)

The company's listing was anticipated for some time as it boasted the highest Korean IPO price tag of the year. Also, its major group BTS has seen monumental success this year, becoming the first Korean group to reach the No.1 spot on the Billboard Hot 100 list with their latest single Dynamite in September, alongside the successful online Map of the Soul On:E concert which drew in over a million viewers last week.

"Big Hit is the best company in the world when it comes to understanding fandom business accompanied with the ability to transition it into added value," said the company's founder and Chief Executive Officer Bang Si-hyuk at the listing ceremony on Thursday.

Big Hit’s IPO pulled in 58.4 trillion won with shares oversubscribed by 607 times during the Oct. 5-6 public subscription. It was the second-highest subscription amount to date, drawing deep-pocketed investors. One investor snatched 113 shares after placing an order worth 8.6 billion won and deposits of 4.3 billion won.

Big Hit is the first domestic entertainment company to debut on the Kospi. The company plans to use the proceeds to repay loans, foster business ventures at home and abroad, and construct a new building for the company.

Big Hit posted 294 billion won in revenue with an operating profit of 49.7 billion won in the first half of 2020. The company is forecast to post record-high earnings in 2021 with an estimated revenue of at least 750 billion won and an operating profit of over 150 billion won, according to the securities industry.

(This article was updated on Oct. 15 at 5 p.m. to reflect the change in share price)

Write to Yun-Sang Ko at kys@hankyung.com

Danbee Lee edited this article.

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