The Big 3 Entertainment Companies Bowed to Big Hit

[Asia Economy Reporter Koh Hyung-kwang] The stock prices of the three major domestic entertainment companies?SM, YG Entertainment, and JYP Entertainment?plummeted simultaneously on the first day of Big Hit Entertainment's (hereafter Big Hit) general subscription. Although they had been growing by being highlighted as 'substitutes,' the momentum has rather weakened as Big Hit's listing date approaches. Given their steep rise so far, there is speculation that a short-term correction is likely after Big Hit's listing.

According to the Korea Exchange on the 6th, YG Entertainment closed at 52,500 won on the KOSDAQ market, down 9.4% from the previous trading day. SM and JYP Entertainment also fell by 5.3% and 4.7%, respectively, the day before. The flagship entertainment stocks, which had risen sharply due to anticipation of Big Hit Entertainment's listing, all closed lower on the first day Big Hit began its general subscription.

At the beginning of the year, the stock prices of the three domestic entertainment companies declined as the spread of the novel coronavirus (COVID-19) led to the postponement of domestic and international performances and the comeback of affiliated singers. However, from May, expectations for the lifting of the ban on activities in China (Hanhanryeong) and the end of COVID-19 sparked a rebound. After news of Big Hit's entry into the stock market in July, investment sentiment across the industry improved, and all three entertainment companies broke their previous highs, showing a steep upward trend.

Compared to early July, JYP Entertainment's stock price rose by 77% (as of September 29). YG Entertainment and SM also saw their stock prices increase by 49% to 63% during this period. On the 28th of last month, when the results of Big Hit's demand forecast for institutional investors (1,117 to 1) were announced, the stock prices of the three entertainment companies surged by 6% to 12% simultaneously.

However, the industry expects increased volatility in entertainment stocks around Big Hit's scheduled KOSPI listing on the 15th. While these three companies had been highlighted as alternatives to entertainment stocks ahead of Big Hit's listing, with expectations reflected in their stock prices, experts analyze that there is no momentum for further rises after the listing as related events effectively disappear.

Park Yong-hee, a researcher at IBK Investment & Securities, said, "Ahead of Big Hit's listing, the three entertainment companies were re-evaluated due to high investor interest, which significantly raised their stock prices," and added, "It is highly likely that volatility across the entertainment industry sector will increase after Big Hit's listing."

There is also a possibility of a short-term correction after Big Hit's listing. Lee Hyo-jin, a researcher at Meritz Securities, stated, "The entertainment industry has experienced a period of accumulated fatigue due to high stock price increases over the past six months," and added, "Expectations for the resumption of concerts and the end of COVID-19 have already been reflected in the stock prices, so the relative attractiveness has decreased."

This content was produced with the assistance of AI translation services.