Will sensational Big Hit IPO make BTS millionaires and their producer a billionaire?

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All seven members of the youth sensation band BTS have become multimillionaires after Big Hit Entertainment has launched a fanatic Initial Public Offer. Big hit entertainment is the management label of BTS, an extremely popular K-Pop group of South Korea. Big hit entertainment has priced the initial public offering of the group at the top of its range on Monday. Buyers in South Korea chased the nation’s largest listing ever in three years.

The band is comprised of seven talented youth influencing personalities-

  1. Kim Tae-hyung- Popularly known as V
  2. Jung Ho-seok – also called J-Hope
  3. Kim Nam-joon- known as RM
  4. Kim Seok-jin- referred to as Jin
  5. Park Ji-min
  6. Jeon Jung-kook, and
  7. Min Yoon-gi- popularly addressed as Suga

The band has been with Big Hit from the very first day when it was still called an obscure start-up label. BTS stands for “Beyond the Scene,” and is highly sought-after for its legions of loyal followers across the world. These fans address themselves as the “ARMY.”

The issue was subscribed more than 1000 times the number of shares on offer. The interest shown by institutional investors made Big Hit riding on the success of the seven-number brand which has now become the first South Korean group to attain the first position on the US Billboard Hot 100 Singles Chart with the song “Dynamite”.

In South Korea, an army of retail investors is known as ‘Ants’. These Ants are clamoring to buy the IPO offering. The analysts and experts are expecting this stock to be the country’s hottest listing this year as the BTS’s die-hard fans are going mad in hopes of securing even a single share in the group.

The IPO was initially priced at 135,000 won per share. This amount is equivalent to $115. In a regulatory filing, Big Hit said that the pricing is at the top of an indicative price range which was announced earlier this month. This range was 105,000-135,000 won.

Around 1,420 institutional investors fought to get the shares in pre-subscription offers. The filing said that about 98% of the investors were ready to pay the top-range price or more to purchase the shares.

Park Sung-ho, the analyst at Yuanta Securities Korea, said that the Big Hit is classified as a global export firm. It has time and again proven its ability to use social media (especially YouTube) for smart market infiltration. It also has a fandom platform called ‘Weverse’ which empowers it with immense control and clarity over its sources of revenue for a label. It has the potential to grow into a massive platform market as and when more and more artists join.

A profit of 49.7 billion won or $42.4 million was reported by the Big Hit for the first half of 2020. This comes despite the cancellations of its events, concerts, and fall in merchandise sales on the Weverse app.

What will happen after this IPO?

This initial Public Offer is set to make the seven members of the BTS group “Multimillionaire stockholders”. Big Hit’s Chief Executive Officer, Bang Si-hyuk, has given them 68,385 shares each in the month of August. These shares are worth nearly $7.9 million at the issue price.

With this IPO the group is all set to raise 962.6 billion won or $820 million by issuing 7.13 million new shares. This is the biggest IPO in South Korea after Celltrion Healthcare raised 1 trillion won in 2017.

After taking into account the common and redeemable preferred shares, Big Hit has valued pricing at nearly 4.8 trillion won. The redeemable preferred shares are shares that can be converted into commonly shared upon the IPO.

The market is quite liquid at the moment leading to predictions that the gross bids from investors can potentially hit the benchmarks of 1 trillion won or $85 billion. And as the oversubscription of these shares can now potentially send tremors through the short-term money markets, Central Bank is closely and carefully monitoring them. Big Hit is expected to list on the KOSPI on Oct. 15 while the Institutional and retail investors’ subscriptions are due on Oct. 5-6.

48-year-old CEO, Bang, owns over 40% of the Seoul-based music agency.  Netmarble Corp., a gaming company, now owns 25% after investing $172 million two years ago. The label owner, Bang Si-Hyuk, is an ideal music producer who is said to be responsible for creating the band and assisting it to achieve the stardom beyond starts in 2013. According to the exchange filing, the IPO issue has made Bang a billionaire.

The stock is expected to make its trading debut on Oct 15 on the Korea Exchange and retailers will be allowed to subscribe for shares early next month. This information has been obtained by local news outlets.

BTS had a gross earning of $170 million previous year. According to Pollstar, a trade publication, it was the fifth among the world’s top concert draws, positioned after Elton John. The 20-year-old members of the band have gained a massive number of followers by sharing the experiences and opening up about their anxieties through social media. Bang has called this initiative a “window into the soul of BTS.”

How has the pandemic impacted their popularity?

The BTS Army of fans, as they like to call themselves, is a trending commodity for investors. The trend comes and continues even during the coronavirus pandemic; a time when all the live performances and tours are canceled and normal event organizing is near to impossible.  

The latest of its achievements is an online concert organized in June which bagged the title of the world’s biggest paid online music event. The concert drew more than 750,000 viewers as reported by the Yonhap News Agency reported.

According to an analyst at Shinhan Investment Corp., Sung Jun-won, it is a great time for Big Hit to go public, Even without concerts, the Album sales have zoomed up to reach a new high and BTS is the focal point of this rising popularity and fame.

 

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