The alliance between Dunamu and HYBE, formed three years ago through a stock swap, appears to be on shaky ground. Both companies have seen their stock prices drop significantly, and their joint venture is now struggling, casting doubt on the benefits of their partnership.
Many now argue that the three-year collaboration has been more of a loss than a gain for both parties. The restriction on the sale of their shares, which was put in place to solidify their long-term partnership, is set to expire in two months, adding further uncertainty to the future of their alliance.
In Nov. 2021, Dunamu and HYBE exchanged stocks via a third-party allotment, aiming to leverage each other’s brand value and jointly enter the non-fungible token (NFT) market.
Dunamu invested $526.3 million to acquire a 5.57% stake in HYBE, while HYBE purchased 2.48% of Dunamu’s over-the-counter shares for $376 million. To maintain their long-term partnership, both companies agreed not to sell each other’s shares for three years, a restriction set to expire on Nov. 23, 2024.
However, there are growing speculations in the market that the partnership between the two companies may soon come to an end once the stock sale restriction is lifted. This is primarily due to the significant financial losses both companies have incurred as their stock prices have declined since the alliance was formed. Additionally, neither company has any immediate growth drivers that could boost their stock prices.
At the time of the stock swap in 2021, HYBE’s stock was valued at over $300 per share, but it has since plummeted to $123—a drastic decline of more than 50% in three years.
For Dunamu, their initial $526.3 million investment in HYBE has now resulted in a loss of over $300.8 million. In its annual report, Dunamu valued its HYBE stake at $435.3 million last year, but with HYBE’s current stock price even lower, the actual loss is expected to be greater.
HYBE has also suffered significant losses from its investment in Dunamu. Shares of Dunamu, which were traded at around $376 per share at the time of the swap, are now worth only $74.84 in the over-the-counter market—a sharp drop to just one-fifth of their original value.
Dunamu’s financial performance has been hit hard by the recent downturn in the cryptocurrency market. In the second quarter of this year, Dunamu’s revenue dropped by 52% from the previous quarter, falling to $193.3 million and its operating profit also fell by 53%, down to $119.6 million.
HYBE is facing its own challenges as BTS, the company’s flagship group, is on a temporary hiatus due to some members fulfilling their mandatory military service. Additionally, an ongoing dispute with Min Hee-jin, the former head of its subsidiary ADOR, has made it difficult for the company to achieve a quick turnaround in its financial performance.
The companies’ joint NFT venture, Levvels, which was initially launched with high expectations and significant attention, has struggled to meet its goals and has fallen short of delivering meaningful results.
According to a report from the Financial Supervisory Service, Levvels posted a mere $175,260 in revenue in the first half of this year. The company recorded an operating loss of $5.1 million and a net loss of $4.5 million. In essence, Levvels has poured money into marketing and operating expenses without generating meaningful returns.
Levvels was established in 2022 as a joint venture between Dunamu and HYBE, located in Santa Monica, near Los Angeles, USA. Dunamu invested $37.6 million, securing a 75% stake, while HYBE contributed $12.7 million, holding the remaining 25%. The company’s business model was centered around leveraging HYBE’s artists, including BTS, to generate revenue by selling NFTs in the U.S. market. However, since its launch, Levvels has been struggling and has consistently operated at a loss.
