Investors are expecting Big Hit Entertainment to pull in the highest subscription demand for public shares during the initial public offering process this year. The company is home to the seven-member boy band BTS which has achieved global success.
Big Hit is likely to raise more than 1 trillion won ($839 million) through the IPO with an estimated enterprise value of up to 6 trillion won, Korean Investors reported earlier.
The industry’s estimated valuation of Big Hit ranges between two trillion won to five trillion won. Hana Financial Investment has predicted the company’s valuation to be anywhere between 3.9 trillion won to 5.2 trillion won.
The company submitted an IPO application on May 28 to get listed on the country’s main bourse KOSPI. The review process was expected to wrap up by July 30 based on the Korea Exchange’s listing guidelines but it has been delayed in a request for additional materials.
Despite the hiccup, the investment industry does not see this to be problematic as delays are quite common and do not necessarily point at a fault. Yet, there are some views that the hold up may be due to concerns that Big Hit needs to diversify its business structure which is heavily dependent on BTS.
Two of the seven BTS members are nearing their mandatory military service with the oldest member Jin’s deadline to enlist being this year. The group will not be able to perform as a complete team for much longer which has sped up Big Hit’s efforts to tap into other projects and engage in various M&A activities.
For example, the entertainment acquired management rights for Pledis Entertainment which manages boy band groups such as Nu’Est and Seventeen.
“Right now, Big Hit’s dependence on BTS is over 90%, but this will drop to 75% by acquiring Pledis,” said Hyun-yong Kim, an analyst at eBest Investment & Securities.
The industry is also expecting to see synergy from the collaboration with beNX, an operator of fan community platform and commerce, and Big Hit 360 which manages content and performances. Big Hit has also acquired entertainment company Source Music which manages girl group GFriend.
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In 2019, Big Hit became a frontrunner in the Korean entertainment industry with a record-high turnover of 587.2 billion won ($491 million), and an operating profit of 98.7 billion won. The company’s operating profit was higher than the combined profit from Korea’s three leading entertainment companies – SM, JYP, YG – which are listed on the country’s junior KOSDAQ market.