BTS Did Not Mention Disbandment or Hiatus... Honest Thoughts "Misunderstandings Spreading"
BTS Dinner Video Revealing 'Solo Activities' Is Not Subject to Disclosure "No Violation"
Video Recorded 2 Weeks Ago, Allegations of Insider Trading Using Time Difference "No Clear Evidence"
[Asia Economy Reporter Lee Seon-ae]
#BTS 'Real BTS Gathering' Pre-filmed and Later Broadcasted: "Why Was There a Time Gap Before It Was Released on the 14th?" - To commemorate BTS's 9th debut anniversary on June 13, the video was released on the 14th. A 'tribute video' for ARMY (BTS's fans). Watching the broadcast reveals it was a recorded show, so the staggered release to prevent insider trading is mere speculation (ARMY). HYBE failed to predict the impact of the gathering content, and internal crisis management did not function (financial investment industry).
#Is BTS Solo Activity Plan a Disclosure Item? - It is neither a contract termination nor a change in team activities, so under current regulations, it is not subject to mandatory disclosure by the Korea Exchange. This is similar to why a top home shopping host’s leave is not disclosed (Korea Exchange).
#Is There Suspicion of Insider Trading? - Based on information observable externally, there is no clear evidence to suspect insider trading (Capital Market Research Institute).
#Should Entertainment Artist Contract Terminations Be Mandatorily Disclosed? - If a company judges that contract termination of an artist may cause revenue decline, it can disclose it even now. Since it is possible under current regulations, there is no need to improve the disclosure system (Korea Exchange). However, HYBE’s response, as the leading entertainment company, negatively affected the entire industry, raising discussions on whether important artist contract terminations or team disbandments should be disclosed (financial investment industry).
#Who Is Responsible for the Sharp Stock Price Drop? - BTS has not declared a halt to group activities. The 'Real BTS Gathering' video also stated they will continue 'Run BTS (group activities)'. HYBE has not officially announced a suspension of group activities. The day after the broadcast containing members’ personal reflections, the media flooded with news of group activity suspension and disbandment. This was decided by the media. However, HYBE’s response was insufficient. If misunderstandings caused severe market reactions like a stock price plunge, an immediate explanatory disclosure clarifying "not suspension or disbandment but concurrent team and individual activities" would have been preferable. It seems difficult to avoid criticism of a weak internal crisis response system. Various countermeasures for stock price drops of listed companies will likely be required (Korea Exchange, financial investment industry).
"Who decided BTS’s suspension of group activities? None of the BTS members mentioned suspension of group activities. HYBE also did not officially declare it. It was the media’s decision. HYBE’s delayed response is regrettable, but they officially clarified that BTS is not disbanding or suspending activities. Of course, since the stock price fluctuated wildly, it is unfortunate that the Korea Exchange’s explanatory disclosure was not used more actively to address investors. This 'HYBE incident' highlights the need to pursue diverse countermeasures for stock price drops of listed companies." (Korea Exchange, Disclosure Department, KOSPI Market Headquarters)
Who Decided the Suspension or Disbandment of Group Activities?
The aftermath of the video titled 'Real BTS Gathering' released on the YouTube channel on the 14th has been intense. On the 15th, HYBE’s stock price plunged 24.87%, wiping out 2 trillion KRW in market capitalization. None of the BTS members mentioned 'suspension of group activities' in the video. However, the next day, news of suspension and disbandment spread widely. Mentions of members’ solo activity plans escalated from suspension to disbandment, causing the stock price to crash. Suspicions arose regarding the staggered broadcast, insider trading, and disclosure violations, all targeting HYBE. The financial investment industry commented, "The response as a listed company was not smooth," but considered other suspicions excessive.
On the 24th, HYBE’s stock opened at 141,000 KRW. After closing at 145,000 KRW on the 15th, it continued a sluggish trend, closing at 139,500 KRW the previous day. Of course, the overall market downturn also played a role. Members RM and Jungkook said, "We woke up to chaos about suspension and disbandment, but that is absolutely not true," adding, "The courage to be honest always invites unnecessary misunderstandings and anger. We have no intention to disband and only spoke about new plans to show various things," striving to correct misunderstandings. HYBE also officially stated, "It is just a temporary break from team activities, and we will expand activities by combining team and individual activities," but this was insufficient to restore investor confidence.
Did They Violate Disclosure Regulations?
Some have pointed out that HYBE, as a KOSPI-listed company, might have violated disclosure regulations. Companies with assets over 2 trillion KRW must disclose if production or transactions exceeding 2.5% of the previous year’s sales are suspended. HYBE’s total assets at the end of last year were 4.7 trillion KRW, and BTS accounts for 70% of HYBE’s sales. The Korea Exchange drew a clear line, stating it is not a disclosure obligation. A Korea Exchange KOSPI Market Headquarters Disclosure Department official said, "During the gathering, BTS members mentioned solo activities in their reflections, and HYBE did not officially declare disbandment, contract termination, or suspension of group activities, so discussing this as a comprehensive disclosure item is inappropriate and clearly not applicable."
Comprehensive disclosure is a voluntary mandatory disclosure. Even if it is a change in activity area rather than contract termination, if it is a company decision, it could be subject to comprehensive disclosure. However, in this case, none of these apply.
Should Artist Contract Terminations Be Disclosed?
Following the 'HYBE incident,' voices have emerged calling for disclosure improvements so that entertainment companies highly dependent on artists disclose activity changes or disbandments. However, since this is already possible under current disclosure regulations, the Korea Exchange believes such discussions are unnecessary. The Exchange pointed out, "If current regulations do not reflect disclosure items and improvements are needed, then improvements should be made. But if BTS’s disbandment, contract termination, or suspension were formalized and had a significant impact on the company, HYBE could have disclosed it through comprehensive disclosure."
A securities firm official said, "It is true that HYBE’s response, as the leading listed entertainment company, negatively affected the entire industry," adding, "Now it will be a matter of consideration whether important artist contract terminations or team disbandments should be disclosed."
Time Gap in Broadcast: Did Insider Information Leak?
There are suspicions that insider information leaked due to the long gap between filming and video release. The gathering was estimated to have been filmed two weeks prior to the broadcast. However, while this could cause misunderstandings, as BTS members explained, the video was released on the 14th to commemorate their 9th debut anniversary on June 13, sharing an honest video exclusively for ARMY. Time was also needed for editing by the agency. For BTS, the 'Real BTS Gathering' was not a video announcing major decisions or announcements. They have always communicated with ARMY this way, and this was another communication video. One ARMY said, "If they intended to deceive by delaying, they would have edited out Suga’s (who by the time of filming had visited the White House) remarks," adding, "BTS videos often have stickers to protect artists, and in this video, when member J-Hope yawned, that part was covered, indicating it was pre-recorded, not live."
Additionally, the Capital Market Research Institute stated that based on externally observable information, there is no clear evidence to suspect insider trading. Except for June 13, the stock price movement was within normal levels according to securities analysts. It is true that HYBE’s stock price, which had maintained the 220,000 KRW range since BTS’s comeback, suddenly dropped nearly 11% on June 13, the day before the video release. The KOSPI also plunged 3.52% that day. However, this alone is not evidence that information about activity changes leaked before the video release.
HYBE’s Internal Crisis Management Fails
HYBE is unlikely to avoid criticism for failing in internal crisis management. HYBE operates a risk management team directly under the Chief Communications Officer (CCO). A securities firm official said, "Since BTS accounts for 70% of HYBE’s sales, the market perceives HYBE as BTS," adding, "The market reacted, but HYBE failed to predict the impact of the gathering content, so internal crisis management did not function properly."
Furthermore, HYBE cannot escape criticism for inadequate response to the stock price plunge as a listed company. If investors and the market overinterpreted, it could have been corrected through explanatory disclosure. The Korea Exchange said, "If not mandatory, companies can voluntarily disclose, and explanatory disclosure is part of voluntary disclosure. HYBE’s press release was a response, but since the market reacted strongly, an explanatory disclosure clarifying that it is not suspension or disbandment would have neatly resolved the issue."
Conservative forecasts from the securities industry are also cited as a cause of the stock price drop. It was almost predictable that group activities would be difficult. Jin, born in 1992, has his military enlistment postponed until the end of this year under the revised Military Service Act of 2020, recommended by the Minister of Culture, Sports and Tourism, making enlistment next year inevitable. Although the video did not mention military service, the primary reason they must pause group activities is military enlistment. Lee Ki-hoon, a researcher at Hana Financial Investment, said, "The temporary suspension of group activities is an indirect expression of enlistment."
However, some analyses suggest the performance gap due to BTS’s enlistment will not be as severe as the market fears. Kim Hyun-yong, a researcher at Hyundai Motor Securities, said, "In terms of albums, unit and solo activities alone can achieve over 8 million sales annually, covering more than 90% of last year’s sales," adding, "Although it is too early to calculate coverage for performances, considering the global draw of Big Bang’s solo tours (G-Dragon, Taeyang, Daesung) with a combined 960,000 attendees in 2017, BTS solo and unit tours are expected to have even greater impact."
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