Mirae Asset Securities eagerly anticipates the return of BTS, as its investment in Hybe has failed to meet expectations. Despite injecting substantial funds into Hybe, the stock prices have consistently declined. This decline can be attributed to investments in non-interest-bearing bonds, effectively resulting in Mirae Asset Securities lending money to Hybe interest-free for the past three years.
According to the Korea Exchange, Hybe concluded trading at 200,000 won on Feb. 8, marking a 1.32% increase from the previous trading day. Hybe’s stock price dipped below the 200,000 won mark for the first time in three months on Feb. 1.
Mirae Asset Securities, having invested 150 billion won in Hybe, closely monitors the company’s stock price. In November 2021, Hybe issued convertible bonds totaling 400 billion won. Han Seong-su, a Master Professional (MP) under Hybe’s subsidiary label Pledis Entertainment, invested 10 billion won, while Mirae Asset Securities contributed the remaining 390 billion won. Mirae Asset Securities later sold down 240 billion won of its investment.
Despite soaring past 420,000 won in November 2021, Hybe’s stock price now sits at roughly half the conversion price of 380,000 won. Although stock conversion has been an option since November of last year, the absence of adjustment conditions for the conversion price has postponed the timeline for recouping investments.
Mirae Asset Securities can exercise a put option from September onwards to demand repayment from Hybe, but this would solely allow for the recovery of the principal amount. An industry insider in the domestic IB sector explained, “At the time of Hybe’s issuance of convertible bonds, the outlook for the stock price was optimistic, making it an appealing investment opportunity.” They added, “This is why Mirae Asset Securities accepted unfavorable terms.”
The optimistic outlook from securities analysts towards the South Korean entertainment industry is fading as album sales, indicative of the companies’ performance, continue to disappoint. The decline in bulk album purchases by Chinese fans since late last year has led to a significant drop in initial sales figures. In January of this year, album sales for NMIXX and ITZY, both under JYP Entertainment, plummeted by 40% and 60%, respectively.
Other factors are also hindering Hybe’s stock price. The government’s initiative to launch the ‘Corporate Value-Up Program’ aims to address the ‘Korea Discount (a tendency for South Korean securities to be assigned lower valuations or bear an inflated risk premium by investors)’ issue. This initiative raises concerns that Netmarble, one of Hybe’s major shareholders, may further sell off shares to repay debts. Netmarble announced in November of last year its intention to sell a 6% stake in Hybe for 523.5 billion won. Following this announcement, Hybe’s stock price plummeted by more than 10% over four trading days. Additionally, Netmarble has placed a 90-day lock-up period on its remaining 12.08% stake in Hybe, which is set to expire in mid-February.
However, the outlook suggesting that Hybe’s fourth-quarter performance last year will align with expectations from securities analysts, making it the only one among the four major entertainment companies, is seen as a positive sign. Kim Kijoo, CEO of KPI Advisors, commented, “Despite the decline in bulk purchases from China, Hybe’s popular groups achieved their highest album sales records last year.” He added, “If the album sales of Le Sserafim and NewJeans, expected to return in the first quarter of this year, perform well, concerns surrounding the South Korean entertainment industry, particularly Hybe’s stock price, are likely to dissipate.”