YG shares plunge amid massive shorting

By Jhoo Dong-chan

YG Entertainment is experiencing a double whammy as investors are short selling shares in the entertainment agency amid the Seungri fiasco.

Market analysts had displayed optimism on the share price of YG Entertainment via their year-end reports last year, but the agency suffered shockingly poor earnings in the first quarter of the year.

Reflecting YG's disappointing quarterly earnings, the size of shorting on YG Entertainment shares reached a new high this month. The nation's universities have also declared a boycott of YG Entertainment's acts since the Seungri scandal emerged in earnest in March.

Shorting or short selling refers to the sale of borrowed shares in the hopes of making a profit from the price fall by buying the shares back at a lower price.

According to the Korea Exchange, investors shorted 1.06 million YG Entertainment shares as of May 20, more than double its outstanding balance in February. It is now worth 38.1 billion won ($32 million), the highest figure ever since the agency was listed on the benchmark KOSPI in 2011.

The share price of YG Entertainment closed at 33,750 won Thursday, losing around 35 percent from its peak in January. The agency's market capitalization, which once nearly reached 1 trillion, has also dipped below 620 billion won.

YG's downtrend is in stark contrast to its rivals.

Investors shorted 400,000 SM Entertainment shares as of last month, but the nation's largest entertainment agency managed to ease the figure at about 230,000 shares this month. JYP Entertainment also managed to reduce the outstanding shorting on its shares in the period.

Market analysts said YG is unlikely to recover its share price anytime soon.

"There's no momentum to lead share prices of YG Entertainment for a while," KTB Securities researcher Nam Hyo-ji said.

"Investors should take a cautious approach. Separate from the Seungri scandal, there is also an ongoing tax audit on YG Entertainment."

Last week, former BIGBANG member Seungri admitted he paid for sex with prostitutes. Following his admission, universities started boycotting YG Entertainment acts at their festivals.

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