K-pop band BTS’ hiatus announcement dents talent agency HYBE’s fortunes; details here

A shockwave has descended upon the music industry. Early this week, popular K-pop band BTS announced that they would go on a 'hiatus', a move so sudden and surprising that it sent the stock price of its talent management agency HYBE tumbling.
 
As soon as the announcement broke the Internet, HYBE's investors began dumping their stocks worth $1.7 billion. Yesterday, the company, which has been managing BTS since its inception, fell 25 per cent to close at $112.29 per share on the KRX, their lowest point since their debut on the Korean stock exchange in October 2020.

To manage the situation, HYBE issued a clarification saying, "BTS are not taking a hiatus" and that "[the] members will be focusing more on solo projects at this time.”   As per reports, these BTS members, who fall in the age group of 25-30, have to serve their mandatory military service for South Korea, hence, may take a break from the group.

Even if one assumes that the hiatus is temporary, it may not be enough for HYBE. In fact, the severity of the impact can be gauged from a comment an investor made, which was quoted by Reuters. “They’ve planted a ‘dynamite’ in the hearts of shareholders”, the investor had said, alluding to one of BTS' famous songs.

But why is the South Korean talent management company in a tizzy?

 HYBE's shares have performed poorly in the recent months. Back in December last year, some BTS members, including RM, Jin and J-Hope had unloaded their HYBE stocks worth $8 million, as reported by Billboard quoting regulatory filings.

Earlier, HYBE founder and chairman Bang si-hyuk had gifted the company's 4,78,695 common shares to all BTS members before it went public in December 2021. He did so "to strengthen long-term partnership with major artists and boost morale," Reuters had quoted the company as saying.

How big is BTS’ involvement with HYBE?  

BTS involvement with HYBE goes deep down as they are the major source of revenue for the firm. BTS alone accounts for 27 per cent of HYBE's album sales in the U.S. Half of the HYBE's albums are sold in Japan, as per company’s Q4 2021 investor presentation.

Did the BTS announcement impact competitors?  

BTS’ hiatus announcement has sent shockwaves among its competitors as well.  K-pop girl group, Blackpink's agency YG Entertainment's shares sank 7 per cent. This firm currently handles 7 K-Pop groups.

Similarly, another talent management firm BTOB's Cube Entertainment's shares fell 4.43 per cent. It manages three K-pop groups, including the newly-launched group LIGHTSUM.

FNC Entertainment. founded by South Korean singer and record producer Han Seong-ho, and which manages K-pop groups like FTISLAND, CNBLUE and others, fell more than 3.21 percent on June 5, 2022.