Big Hit's Stock Falls on First Day of Listing... Top 3 Entertainment Stocks Also Plunge Without Gains
3Q Earnings Uncertain... Most Face Year-on-Year Decline Concerns
Growth Potential Remains... "K-pop Influence Expanding Worldwide"
[Asia Economy Reporter Minwoo Lee] The stock prices of the top three entertainment companies, which were expected to benefit from the listing of Big Hit Entertainment (hereinafter Big Hit), the agency of BTS, plummeted. This is interpreted as a consequence of Big Hit's stock price, the biggest IPO of the year, experiencing unexpected sluggishness from the first day of listing.
According to the Korea Exchange on the 16th, the stock prices of the 'Big 3' entertainment companies?SM, YG Entertainment (YG), and JYP Entertainment (JYP)?all closed down more than 5% the previous day. YG experienced the largest drop, closing at 44,900 KRW, down 6.75% from the previous session. During the day, it even fell as much as 10.59% to 43,050 KRW. SM and JYP also closed down by 6.73% and 5.29%, respectively.
Big Hit, which was listed the previous day, briefly recorded a 'ttasang' (opening price double the IPO price followed by the upper limit price) in the early trading hours but eventually closed at 258,000 KRW, down 4.5% from the opening price. The sluggishness continued the next day as well. As of 10:04 AM, it recorded 213,500 KRW, down 17.35% from the previous session. The Big 3 stocks?YG, SM, and JYP?also showed a decline of about 1%. Despite the uncertainty in concert revenues due to COVID-19, Big Hit, which gained attention with BTS's successful run, was expected to have a spillover effect on entertainment stocks, but concerns are emerging that it might end as a 'fleeting dream.'
The third-quarter performance outlook is uncertain. Except for YG, all are expected to show negative growth compared to the same period last year. According to financial information provider FnGuide, JYP's market consensus for third-quarter earnings this year is sales of 34 billion KRW and operating profit of 8.4 billion KRW, down 25.38% and 43.24%, respectively, from the same period last year. This would be the lowest quarterly performance this year. SM is expected to show a similar trend, with sales of 131.4 billion KRW and operating profit of 7.3 billion KRW, down 24.24% and 63.23%, respectively, from the third quarter of last year. Only YG is expected to perform relatively well. Sales are forecasted at 59.8 billion KRW, down 6.06% from the same period last year, but operating losses are expected to turn into profits.
However, despite the difficulty of holding concerts due to COVID-19, the presence of K-pop in the global music market is growing, indicating that growth potential still exists. Leading idols such as Twice (JYP), scheduled to return with a new album on the 26th, and Blackpink (YG), who released a new album on the 2nd, are making comebacks one after another, raising expectations overseas. SM is also aiming to improve performance with male idol groups like EXO and NCT, as well as new female idol groups.
Moreover, there is an analysis that the overall industry's mood reversal is possible, led by Big Hit, which has consistently recorded strong performance despite the prolonged COVID-19 pandemic. Sung-ho Park, a researcher at Yuanta Securities, explained, "Big Hit's ability to monetize the BTS fandom through its own merchandise and content sales is overwhelming," adding, "The possibility of entertainment stocks rising due to Big Hit's popularity rally still remains."
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