Excitement builds as S. Korea firm behind BTS nears IPO

Kyodo News

Posted at Oct 08 2020 08:43 PM

Members of South Korean boy band BTS pose on the red carpet during the annual MAMA Awards at Nagoya Dome in Nagoya, Japan, December 4, 2019. Kim Kyung-Hoon, Reuters file photo

SEOUL - Investors are anxiously awaiting as the South Korean entertainment company behind hugely popular K-pop boy band BTS plans its initial public offering next Thursday, with its market value expected to reach 4.8 trillion won ($4.14 billion).

As institutional investors sought a slice of Big Hit Entertainment shares, the company's IPO price has reached the top end of the range indicated by it earlier. As a result, the company is set to raise around 960 billion won from debuting on the Korea Exchange.

Seven members of the band, who are all in their 20s, will each receive shares worth 9.2 billion won.

Since its debut in South Korea in 2013, BTS has gone on to win many fans across the world with its synchronized dance moves and hip-hop songs as well as their beautiful melodies.

BTS's songs are known for lyrics that address social issues, one reason the group seems to resonate with many young people. The group topped the Billboard album chart in 2018 and reached the No. 1 on the Billboard Hot 100 songs chart this year.

For many years, South Korea's entertainment business had been dominated by three major companies. But Big Hit Entertainment, a relative new entrant to the market, had an operating profit last year larger than those of the three companies combined.

Most of its earnings come from businesses related to BTS.

The South Korean government has expressed hopes for increasing demand for BTS-advertised products and BTS-related tourism. The Ministry of Culture, Sports and Tourism recently estimated that its recent big hit single "Dynamite" would alone generate an economic effect worth 1.7 trillion won.

As is often the case with a South Korean boy band, however, mandatory military service hovers over the group members. That leaves a potential question mark on Big Hit Entertainment's post-IPO prospects.

Concern over the company's business prospects briefly arose when speculation grew that the group's oldest member, 27-year-old Jin, would soon serve in the military. South Korean men usually begin serving in the military before turning 28.

The company sought to quiet the chatter in early September, after it had announced its IPO plan, by saying that Jin's conscription could be postponed until the end of next year under a provision in the military service law.

The company is believed to be referring to a provision that allows people enrolled in graduate schools to postpone their mandatory service.

But all seven members will have to serve between 18 and 22 months in the military at some point, provided the law remains unchanged. That means the company will have to find a way to keep the group relevant while it lacks some of its members due to military duty.