BTS label Big Hit Entertainment look to go public, but is it really the best time?
- Aiming to capitalise on BTS mania, Big Hit Entertainment is eyeing a stock market debut
- But the coronavirus may affect plans, while K-pop has been hit hard by scandals involving the country’s biggest names
K-pop may face its harshest critic yet: investors.
Big Hit Entertainment, the music label behind global boy band phenomenon BTS, is eyeing a public market debut.
Sales are surging, but its fortunes largely depend on one act in a hit-driven business. With the coronavirus outbreak now eating away at concert sales, a high valuation of the company increasingly sounds out of tune.
BTS are an even bigger South Korean cultural export than Oscar-winner Parasite. Thanks to Spotify, YouTube and viral-video app TikTok, K-pop’s reach has extended beyond Asia and into Western markets.
The recently released “Map of the Soul: 7” marks BTS’ fourth album to reach No 1 on the US Billboard 200 chart in less than two years. The last pop group to achieve that milestone was The Beatles.
Big Hit wants to capitalise on BTS mania. The music label, backed by video-games outfit Netmarble, has hired banks for an initial public offering this year, data provider Refinitiv reported last month.
Big Hit recently said revenue last year nearly doubled to 588 billion won (US$474 million) while operating profit reached 98 billion won.
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Assuming the company can double its revenue again this year and maintain the same operating profit margin, Big Hit would be worth around US$2.1 billion.
Even so, the company is heavily dependent on BTS, whose members are nearing the age of South Korea’s compulsory military service. In such a fickle business, any extended hiatus could be career-ending.
Moreover, K-pop stocks have been hit hard by recent scandals involving the country’s biggest names.
YG Entertainment, for example, has lost more than 45 per cent of its market value since last March, when one of its stars quit on the back of bribery and prostitution allegations.
Covid-19 is also proving to be a literal show-stopper. BTS have already cancelled this year’s Seoul tour, citing unpredictability of the outbreak which has wreaked havoc on major events including US music and tech fest South by Southwest, as well as the latest James Bond movie release.
Ticket sales for BTS’ upcoming Europe shows have been suspended and the US leg also looks in doubt. Against this backdrop, it’s hard to believe Big Hit can deliver a chart-topping market debut.
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