The Dynamite blew up.
A day after the management company of chart-topping Korean K-Pop band BTS went public with a bang, its stock plunged 22.3%.
Big Hit Entertainment KR:352820 pulled off this year's highest-profile stock debut in Seoul, offering investors a pure play on the Korean entertainment industry. The bulk of bands there are manufactured, cobbled together from performers recruited at a young age and trained as employees in dance moves, styling and, oh yeah, a little music from time to time.
Big Hit's two-day performance gives the company a market capitalization of US$5.9 billion. The shares were sold at 135,000 Korean won, but doubled on debut, and traded up as much as 160% from the list price, before closing on a 91.1% gain.
The management company raised US$840 million in the sale, with 60% of the shares falling into institutional hands, 20% to individual investors and 20% to band members and other employees. The company says it will use the proceeds to buy up other music labels in Korea and also to develop artists at home and overseas.
Each band member was granted shares that were worth US$15 million apiece by the end of the first day of trade. But critics point out that the company is essentially entirely dependent on their success, unlike other music-management companies with a stable of stars.
BTS accounted for 87.7% of Big Hit's revenue in the first half of the year. The entertainment industry is one of the most fickle around, of course, so the company is good only so long as the band continues its run.
The perils of a one-band concentration were made clear earlier this week by a frankly weird quasi-boycott from Chinese fans. The surely short-lived storm started when band leader Kim Nam-joon - better known as RM for "Rap Monster" - accepted an award for services to U.S.-Korea relations from the New York-based nonprofit the Korea Society.
During the online awards ceremony, RM referenced the historic bonds that date to the Korean War. "We will always remember the history of pain that our two nations shared together, and the sacrifices of countless men and women."
Innocuous stuff. But of course the U.S. and South Korean forces were fighting against North Korea and China. So Chinese fans went nuts that RM had digitally spat on the graves of their fallen soldiers. Of course he did nothing of the kind. He said some kind words on shared U.S.-Korean relations in accepting an award for U.S.-Korean relations.
Still, people posting to the Chinese social-media apps Weibo and WeChat were soon registering outrage with threads such as "BTS humiliated China." Chinese consumers are always attempting to throw their weight around in this way. They are frankly often encouraged to do so at times of economic stress by political leaders who are keen for a diversion. Unfortunately, foreign companies play along for fear of losing Chinese custom. Within a day or two, brands such as Samsung, Fila and Hyundai had pulled collaborations with BTS from their Web sites.
I doubt Chinese girls are going to fall out of love with their Korean idols for long. But the episode highlights how fraught international relations can be for a Pacific-spanning band brand.
The seven-member boyband recently topped the U.S. charts with their song Dynamite, the first Korean musicians to do so. It debuted at No. 1 on the Billboard Hot 100 when it came out on August 31, and is still No. 2 today, behind only a remix of Jason Derulo's Savage Love. Oh, and what's special about that remix? It contains a Korean verse, sung by BTS. So it's actually the Korean band's second No. 1.
Dynamite is their first single sung entirely in English, but BTS has had four chart-topping albums on the Billboard 200 chart, the bulk of songs sung in Korean. BTS hold a Guinness World Record for the most Twitter "engagements," with 422,228 retweets, replies, follows and the like.
BTS stands for the Korean phrase Bangtan Sonyeondan, or "bulletproof boy scouts." The members hoped to convey that the normal teen-age angst and perceived slights at that age simply bounce off them. With their success in the English-speaking world, they said it also stands for Beyond the Scene, they decided in 2017.
We haven't got a vaccine for Covid-19, but BTS have delivered a dose of bubblegum-pop medicine designed to lighten the mood. The first time I heard Dynamite, I knew it would be an earworm, and my "tween" kids love it. It's damn good pop.
We'll be sick of it, too, of course, now that it's everywhere. Big Hit has proved adept at tapping YouTube, where Dynamite set a record number of views for its first 24 hours on the site. Big Hit also uses social media extensively to promote BTS and have them "meet" fans, since live performances are currently virtually impossible to pull off.
BTS held its first pay-to-attend online concert in June, which gave the band another Guinness World Record. This time, it was for the largest-ever event as a livestreamed performance, attracting 756,000 fans. A concert last weekend drew 990,000 paying fans, generating around 50 billion won (US$42 million).
Big Hit controls the BTS presence online, which is likely to guarantee it significant revenue for years to come. It runs a platform for fans called Weverse where the boyband members post messages and interact with fans, and sell merchandise.
Big Hit founder and co-CEO Bang Si-hyuk, known as "Hitman Bang," is now K-Pop's first billionaire. Bang cut his teeth at JYP Entertainment KR:035900, previously Korea's largest entertainment agency. Despite having numerous artists under its name, JYP has a market cap of US$1.1 billion, one-fifth the size of the BTS management company.
The success of BTS drove Big Hit to first-half 2020 sales of 294 billion won (US$247 million) and an operating profit of 49.7 billion won (US$42 million), topping the combined total of JYP and rival agencies SM Entertainment KR:041510 and YG Entertainment KT:122870.
Investors should beware the end of the six-month institutional lockup on Big Hit's shares. But the K-Pop wave shows no signs of weakening in strength. So investors can likely enjoy rising share prices so long as the hits keep coming.