DearU’s value nears YG Entertainment after strong Kosdaq debut

Shares of DearU Co., a K-pop fandom platform in South Korea, fell on Thursday, the day after a strong Kosdaq debut, which briefly put the company’s market value ahead of established label YG Entertainment Inc.

DearU was 2% lower at 65,000 won in late Thursday trade as investors took profits, underperforming the benchmark Kodaq index’s 0.3% rise. The stock fell as much as 12% earlier in the day.

On Wednesday, the platform, backed by Korea’s music powerhouses SM Entertainment Co. and JYP Entertainment Inc., made a stellar trading debut with shares opening at 52,000, double the initial public offering price of 26,000 won.

The stock quickly rose by the daily limit of 30% to 67,600 won, but pared earlier gains to close Wednesday up 27.9% at 66,500 won. At its closing level, DearU’s market capitalization was 1.34 trillion won ($1.13 billion), surpassing YG Entertainment’s 1.3 trillion won.

One of Korea’s top three entertainment agencies, YG manages famous K-pop stars such as girl group Blackpink and boy band Big Bang.

With Thursday’s slide, however, DearU’s market cap fell to 1.32 trillion won, slightly below YG’s 1.34 trillion won.

The stock was strongly sought after by institutional and retail investors who bet on DearU’s growth potential as a K-pop fan engagement platform.

In late October, the company priced its IPO at 26,000 won a share, above the top end of its indicative price range, and was 2,000 times oversubscribed during the bookbuilding process with institutional investors.

BUBBLE, A CASHCOW FOR DEARU

Established in July 2017, DearU has attracted K-pop fans with its paid service "bubble," a global messenger platform launched in February 2020 for communication between fans and K-pop groups.

For a monthly subscription fee of 4,500 won, users can exchange messages with their beloved artists, just as they share mundane, everyday things with their close friends through chat services such as KakaoTalk. An artist talks to multiple fans, sharing selfies or photos and songs.

DearU has received investments from JYP Entertainment as well as SM Entertainment as the two Korean music labels were striving to compete against fan platform market leader Weverse, operated by HYBE Co., the label behind boy band sensation BTS.

DearU has been gaining a stable stream of revenue from its bubble service by making use of the subscription economy alongside enhanced fan loyalty.

Bubble currently provides messaging services with some 230 K-pop artists, including JYP Entertainment’s TWICE and ITZY and SM Entertainment’s Red Velvet, EXO, NCT, Super Junior and rookie girl group Aespa.

The company has also expanded the service's lineup of artists by inviting K-pop boy bands such as SF9, CNBLUE and N.Flying of FNC Entertainment Co.

The number of Dear U bubble’s subscribers hovers around 1.2 million, with foreigners accounting for 71%.

METAVERSE, NFT & ETF

Analysts said DearU’s stock has upside potential as the company aims to expand its digital services from the global fan messenger platform to a metaverse platform. The company is also said to be preparing to launch non-fungible tokens (NFTs) for assets of affiliated K-pop stars.

A local fund manager said DearU may also be included in metaverse-related exchange-traded funds (ETFs), a positive that could further boost its share price from the current level.

DearU earned 6.6 billion won in operating profit on revenue of 18.4 billion won in the first half of this year. The January-June sales surpassed the full-year revenue of 13 billion won for 2020.

Write to Sul-Gi Lee at surugi@hankyung.com
In-Soo Nam edited this article.