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Saturday, March 2, 2024

HYBE shares rise as world contemplates company sans BTS

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BTS performs its free concert "BTS 〈Yet To Come〉 in Busan" on Oct. 15 at the Busan Asiad Main Stadium. [BIGHIT MUSIC]
BTS performs its free concert “BTS 〈Yet To Come〉 in Busan” on Oct. 15 at the Busan Asiad Main Stadium. [BIGHIT MUSIC]

HYBE rose 4.8 percent in trading Tuesday, the day after the company said that a member of BTS would be enlisting in the army soon.

“The announcement has put an end to months of speculation about the group’s military service,” said Choi Min-ha, senior analyst at Samsung Securities. “Now that the BTS-related uncertainty has disappeared, HYBE’s share performance should hinge on the results of its business strategy.”

HYBE closed at 120,500 won ($84) on Tuesday from the close of 115,000 won on Monday, an all-time low.

In October 2020, the company — then known as Big Hit Entertainment — went public at 135,000 won a share. It rose as high as 421,000 in November 2021 only to fall back steadily since then.

Choi has cut her target price for HYBE by 15 percent to 178,000 won.

On Monday, the company disclosed to the stock exchange that Kim Seok-jin — stage name Jin — would no longer seek a deferment from mandatory military service.

All able-bodied men in Korea are required to serve the country for a period of 18 to 21 months.

“Now that the BTS-related uncertainty has disappeared, HYBE’s share performance should hinge on the results of its business strategy,” said Lee Hye-in, an analyst at Yuanta Securities.

“Most importantly, as there is no need to predict when BTS members will start mandatory military service, the company’s 2023 to 2024 earnings estimates have become visible and 2023 earnings have bigger upside potential than downside risk.”

In the announcement, the company said that the other members would also be enlisting. It added that they would be together again as a group of seven in 2025.

Since BTS was formed in 2013, and especially since it became a major force in K-pop a few years later, mandatory military service has hung over it. HYBE’s stock has fluctuated on reports of a possible law that would exempt the group from service obligations.

HYBE generated 98.2 percent of its revenue from BTS in 2018. The company sought to diversify its portfolio by acquiring music labels and tech companies. It managed to bring the percentage down to 87.7 percent by the time it went public in October 2020.

On June 15, Suga, a BTS member, suggested in a YouTube video that the band would be taking a temporary break from group activities. HYBE’s stock plummeted 26 percent the following day to near its initial public offering price.

J-Hope was the first to go solo following the “hiatus” video with “Jack In The Box,” which was released on July 15. Only 357,000 copies were sold in two weeks.

“Fans could support BTS and its members even more because their situation has been involuntarily caused by Korea’s social structure,” said K-pop critic Park Hee-a. “The results may differ for each, but in a way, the members now have to prove on their own what the band has built over the years.”

BTS performs its free concert "BTS 〈Yet To Come〉 in Busan" on Oct. 15 at the Busan Asiad Main Stadium. [BIGHIT MUSIC]
BTS performs its free concert “BTS 〈Yet To Come〉 in Busan” on Oct. 15 at the Busan Asiad Main Stadium. [BIGHIT MUSIC]

There are no specific plans for which members will follow or when. The company “hopes to see BTS back together in 2025,” according to the filing. To achieve that timeline, members would have to start their duties by early 2024 at the latest.

The second oldest in the group is Suga, who was born in 1993. The other members were born after 1994.

In a letter to shareholders on Monday, HYBE CEO Park Ji-won emphasized the company’s ongoing efforts and future plans, saying it has new bands and non-K-pop businesses.

HYBE has four new groups ready for 2023. It has acquired the game and tech companies to mix K-pop content with digital services, such as the BTS Island mobile game, and is merging its Weverse fan community service with Naver’s V Live livestream.

“HYBE currently has nine labels under its wing,” Park said in the letter. “By giving each label independence and power, we are enabling diversity in music and content while also facilitating cooperation and competition. Due to this effort, all artists except BTS have recorded over threefold growth in annual revenue between 2020 and 2022.”

The company will be releasing more details, Park said. It will be announcing plans related to games next month at the earliest.

In August 2021, HYBE acquired Ithaca Holdings, a Los Angeles-based entertainment company, and talent agency, for $1 billion. The purchase has proved to be a challenge for the company. It has been a drag on operating profit as legal fees and other expenses add up.

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]