This year has proven to be a difficult one for HYBE.
For much of 2024, the world’s leading K-pop company has been dealing with a very public dispute involving Heejin’s thoughtsformer CEO movetags i like it.
Last week girl group new jeansADOR’s leading artists have announced they are leaving the label, apparently as a result of Min’s departure earlier this year. HYBE disputed the group’s unilateral decision, saying their contract remains valid.
The company also faced public embarrassment last month when a South Korean National Assembly committee released a trove of internal documents. The documents included disparaging comments about some HYBE acts as well as those of other K-pop institutions.
Now, according to news reports, HYBE’s founder and chairman, Bang Shi Hyukis facing an investigation by South Korea’s financial regulator the Financial Services Supervisory Authority (FSS) over what the media described as “secret” contracts it entered into with certain shareholders before and during its 2020 initial public offering.
According to news reports, these contracts have brought some 400 billion won ($338.8 millioncalculated at the average exchange rate in 2020) after the IPO.
The contract involves three local private equity funds – STIC investment, Eston Equity Partnersand new major stake. The funds reached an agreement with Bang in 2018, two years before the IPO, to take a stake in HYBE (then known as Big Hit Entertainment).
The contracts purportedly exempt most of the funds’ stakes from lock-up restrictions that would prevent them from selling shares immediately following an initial public offering. Business Korea. They also authorized Bang to take 30% If the IPO is successful, the private equity firm sells the shares at a profit. If not, Bang would be required to buy back the private equity firm’s shares under the put option terms in the contract.
As a result, these funds were able to sell a large portion of their holdings – 4.99% HYBE’s outstanding shares – days after IPO. Some news outlets, including Korea Economic Daily – said this was the reason why HYBE’s stock price plummeted shortly after the IPO day buzz.
On October 15, 2020, HYBE began trading on the Korean Exchange, with an opening price of 270,000 won ($229) per share, or twice the IPO price 135,000 won ($114.50). The surge in share price means Bang’s net worth soared to more than US$2 billion, MBW reported at the time.
However, within days, HYBE’s stock price began to plummet, falling back from its highs 351,000 won all the way to its IPO price 135,000 won.
“HYBE stock and its retail investors took a big hit after the highly anticipated IPO, which…only Bang and [private equity funds]” think Korea Economic Daily.
this daily STIC Investments reportedly profits 961.1 trillion won ($814 million) from stock sales, investments 103.6 trillion wonand the initial investment amounts of the other two private equity funds are also “similar” 125 trillion won.
Bang himself also cleaned up the area 400 trillion won.
The legal sticking point here is that HYBE reportedly failed to disclose the shareholder agreement to regulators and investors ahead of its IPO, which could have resulted in HYBE’s early investors losing money if the company’s stock price fell below its opening price.
This has now triggered an FSS investigation into whether the transactions violated South Korea’s Capital Markets Act and constituted unfair trading practices. Korea JoongAng Ilbo the report said.
HYBE denied any allegations of wrongdoing in a disclosure on Friday (November 29).
“Our company provided relevant shareholder agreements to the IPO underwriters during the listing preparation process,” and the underwriters reviewed the disclosures, HYBE said. JoongAng Ilbo.
HYBE’s IPO underwriter is NH Investments and Securities and JPMorgan Chaseand Amazing Asset Securities Serves as joint underwriter.
An unnamed representative of one of the brokerage firms told reporters Business Korea Since this is a “private agreement between shareholders,” no disclosure is required.
“But, it’s possible [private equity fund] The stock sale was mentioned in securities reports.
“Our company provided relevant shareholders’ agreements to the IPO underwriters during the listing preparation process.”
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Private equity funds dispute claims their share sales caused HYBE shares to tumble, Business Korea the report said.
“When Bang and [PE firms] Agreement signed in 2018, [K-pop group] base station Military service is expected to be completed before the IPO, making it a long-term investment of five to six years, and [PE firms] Put options were requested as a countermeasure,” an investment banking insider told the publication on condition of anonymity.
“In order to avoid burdening the company, Bang decided to use his personal stock to purchase put options and agreed to share some of the excess profits.”
The person familiar with the matter added that “multiple law firms” were consulted during the IPO application and securities report writing process, and “it was determined according to law that there were no procedural issues, so it was not included in the report.”
HYBE share price falls 2.77% On Monday (December 2), after news broke that the FSS was investigating the contracts, it closed at 189,800 won ($135) per share.
Like other K-pop institutions, HYBE’s stock price has come under pressure this year. Despite a brief rally since late September, the company’s stock price has fallen more than twenty one% year to date.global music business
