Written by Anna J. Park
The stock prices of South Korea's four major entertainment companies have plummeted. This was primarily triggered by a highly publicized dispute at HYBE, the management company of K-pop giants BTS. Market participants have suggested that the ongoing dispute plaguing South Korea's largest entertainment company in terms of market capitalization is undermining investor confidence in the country's entertainment industry as a whole.
According to the Korea Exchange (KRX), the stock prices of four major entertainment companies fell throughout April.
HYBE stock saw the biggest decline in April, plunging 12.17%. This was followed by a 9.9% drop in YG Entertainment stock, a 9.6% drop in SM Entertainment stock, and a 7.4% drop in JYP Entertainment stock.
The decline is even more pronounced when compared to the stock prices at the beginning of this year, with all four companies showing significant stock price declines.
JYP has performed the worst, with its stock price falling 34.15% since the beginning of the year, followed by YG, which has fallen 16.6%. SM stock has fallen 13.8%, and HYBE has fallen 13.4% in the first four months of this year.
Foreign investors and institutional investors have led the selling, moving into net short positions totaling about 700 billion won ($507 million) so far this year, which is a huge investment in the future prospects of the four companies. This reflects a waning optimism about the earnings and operating profits of the four companies going forward. The current growth momentum is likely to be maintained in the near future.
A notable trend is the contrasting behavior of individual investors, foreign investors, and institutional investors. While foreign investors and institutional investors sold entertainment stocks, individual investors went bargain hunting.
For example, from April 22nd to April 26th, when the feud between HYBE and its sub-label Adore (the management company of K-pop group NewJeans) was widely reported, foreign investors and institutional investors each received 154.5 billion won. They sold HYBE shares worth 36.6 billion won. . As a result, HYBE's stock price fell by 12.58%, reducing its market capitalization by more than 1.2 trillion won in just five trading sessions.
In contrast, individual investors bought 191.7 billion won worth of HYBE stock during the same period. period. Net buying by individual investors reflects their strong belief in the fundamental earnings power of major entertainment companies, despite short-term fluctuations in current stock prices.
Additionally, the fact that major K-pop artists and new groups from the four major entertainment agencies are scheduled to make comebacks in the near future is also raising individual investors' expectations for profits.
“Even in the worst-case scenario where NewJeans is removed from HYBE's artist lineup, the negative impact on the company's annual revenue and operating profit is estimated to be less than 10%,” said Park Soo-young, an analyst at Hanwha Securities. Ta. He added that the company's long-term growth prospects are expected to be maintained.
Ji In-hye, an entertainment and media analyst at Shinhan Securities, also maintained a positive outlook on entertainment stocks, believing that “the momentum from the second quarter has not changed.''