Two and a half years have passed since South Korea’s major firms, Hybe and Dunamu, executed a substantial equity swap deal worth hundreds of millions of dollars. Despite their strengthened business ties following the swap, both companies have faced significant declines in share prices, resulting in substantial valuation losses.
Nevertheless, industry insiders consider Hybe engaged in a ‘profitable business.’ According to sources familiar with the matter, the company has seen a net inflow of $145 million (200 billion won) and secured substantial dividends.
On April 15, financial analysts reported that Hybe and Dunamu swapped shares in November 2021 through a third-party allotment method. At that time, Hybe purchased a 2.48% stake in Dunamu for $360 million (500 billion won), valuing the company at $14.5 billion (20 trillion won). Conversely, Dunamu acquired a 5.57% stake in Hybe, valued at roughly $10 billion (14 trillion won), for $559 million (700 billion won).
By the end of last year, Hybe’s balance sheet reflected a book value of 861,004 Dunamu shares at $99 million (137 billion won), significantly less than one-third of the original investment of 500 billion won. As Dunamu is not publicly traded, its share values are reassessed annually. On the private ‘Stockplus’ platform, Dunamu’s market cap is just $3.2 billion (4.45 trillion won).
The losses Dunamu recorded on its Hybe shares were relatively minor. The company’s last business report valued its 2.3 million Hybe shares at $418 million (579 billion won), 17% below the initial investment cost. Hybe’s stock price has shown volatility, peaking at $289 (400,000 won) per share in November 2021 before plummeting to a low of $79 (110,000 won) and is now fluctuating around $152 (210,000 won).
Investment banking professionals generally view Hybe’s situation as more favorable. One industry analyst said, “Hybe effectively netted $145 million (200 billion won) after dividends and after accounting for the difference in their respective investments, which provided a financial advantage over Dunamu.” He added, “Specifically, Hybe invested $360 million (500 billion won) in Dunamu, while Dunamu invested $559 million (700 billion won) in Hybe.”
Dunamu has increased its dividend payouts over the years, issuing 594 won per share in 2021 and raising it to 5,768 won in 2022, with last year’s dividend at 2,033 won per share. Hybe, holding 861,004 shares, likely collected around $5.2 million (72 billion won) in dividends. In contrast, Hybe only started paying dividends last year, distributing 700 won per share, with Dunamu earning about $1.15 million (16 billion won) in dividends.
The collaborative efforts between the two closely allied companies have yet to yield visible results. In 2022, Dunamu and Hybe launched a joint venture in Los Angeles called ‘Levvels,’ utilizing Hybe’s artists like BTS in a business focused on non-fungible tokens (NFTs). Dunamu holds a 65% stake, and Hybe owns 35%. The venture, led by Dunamu founder Song Chi-hyung, reported a revenue of $361,400 (500 million won) last year, doubling from the previous year, but incurred an operating loss of $13 million (18 billion won).
