K-Pop Genius Suffers US$2.6 Billion Hit With Unexpected Split From BTS

Bloomberg — It was supposed to be a day of celebration, not heartbreak, for the seven members of K-Pop (Korean pop) sensation BTS and their legions of fans around the world.

In many ways, the group has never reached such a high point at their annual “Festa.”. In a period of just two months, they had performed to more than 200,000 people in Las Vegas, visited the White House dressed in black tie and released an album, “Proof,” commemorating megahits that have amassed tens of billions of views and earned their backers a fortune..

For more than half an hour, the pop stars ate, drank, chatted and reminisced around a table framed by dozens of purple balloons. After being teased for his sleepy appearance, J-Hope, the versatile rapper, dancer and singer of the group, who days earlier made history by being named headliner of Chicago’s Lollapalooza festival, revealed the news: The seven are going to move to act alone.

The BTS Army, the group’s huge fan base, saw the group’s hiatus as the end of an era.. And with it also went the fortune of Bang Si-hyuk, the South Korean billionaire behind the boy band (boy band) that took the world by storm.

Shares in Bang-founded Hybe Co. (352820) plunged 25% in a single day last week following the announcement, prolonging the company’s months-long slump and reducing Bang’s fortune by $2.6 billion from his November high to $1.2 billionaccording to the Bloomberg Billionaires Index.

“Hybe is the house that BTS built,” said Jeff Benjamin, a widely followed journalist who covers K-Pop. “When there is a change in the flagship artist or the product, people are going to worry even though it may not be that different.”

Bang, who controls 31.8% of Hybe, founded the company in 2005 after beginning his career as a music producer.. In its early years, the business nearly went bankrupt before scoring its first hit with local group 8Eight’s “Without a Heart” in 2009. BTS released their debut album in 2013.

He became an unlikely billionaire after the company’s initial public offering in 2020by which time BTS had already teamed up with Halsey, Nicki Minaj, and Steve Aoki, had appeared on “The Tonight Show Starring Jimmy Fallon” Y “Saturday night Live”, and caused fans to camp out for days before a free concert in New York’s Central Park for “good morning america”. The IPO also gave the band members, all of them in their twenties, stakes valued at millions of dollars..

BTS, and the industry in general, prospered during the Covid-19 lockdowns thanks to online videos, streaming services, and album sales.. Once the pandemic subsided, the mania grew even more. Recent performances in Las Vegas attracted fans from around the world for four live concerts. ARMY members, who pay a fee for exclusive access to presales, special merchandise, content, and more, snapped up all the tickets before they went on sale to the general public. Desperate fans shelled out up to $15,145 for top-shelf tickets on the resale market, while attendees kitted out with themed hats, T-shirts and glow sticks, known as Army bombs.

Hybe’s revenue jumped 58% to nearly 1.3 trillion won ($1 billion) last yearwith almost 70% of its operating profit coming from the brand that BTS manages, according to Meritz Securities Co. (008560). The shares more than tripled from their 2020 listing to their November high.

Hybe’s dependency on BTS was always a concern. The company has tried to diversify, adding new artists and entering different business areas.. It has partnered with the operator of South Korea’s largest cryptocurrency exchange to sell non-fungible tokens (NFTs) and bought Ithaca Holdings, an American media company that is behind stars like Justin Bieber and Ariana. Great. Last year’s alliance gave both artists millions of Hybe shares.

Although it’s still too early to see the success of these startups, BTS’s hiatus is still a blow.. SK Securities Co. (001510) cut its estimates for Hybe’s operating profit by 9% to 234.9 billion won for 2022, and by 24% to 273.2 billion won for 2023. Analyst Hyo-ji Nam said that the projections could increase when the BTS members’ individual projects begin..

A representative for Hybe did not respond to requests for comment.

Even if the band reconvenes, concerns remain for Hybe’s future, as the artists remain subject to around two years of military service.. The company’s shares are down 60% this year, much more than those of agencies JYP Entertainment Corp (035900), SM Entertainment Co. (041510) and YG Entertainment Inc. (122870).

“It is not about how they are going to reduce their dependence on BTS,” Hyunyong Kim, an analyst at Hyundai Motor Securities Co (001500), said of Hybe, adding that the two are too intertwined to be separated. “It’s about how they will deal with the possible risks arising from the issue of military service.”

With the assistance of Paulina Cachero.

This article was translated by Andrea González

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