Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
STIC speeds up divestment from BTS agency
By Park Jae-hyuk
By Park Jae-hyuk
STIC Investments is accelerating efforts to exit its investment in Big Hit Entertainment, the label of K-pop phenomenon BTS, in an attempt to maximize profit.
The domestic private equity firm (PEF) sold 400,000 shares for 66 billion won ($59 million) in a block deal. This came two months after the third-largest shareholder of Big Hit unloaded 196,177 shares for 61 billion won, Oct. 15, the first day of the entertainment firm's listing on the benchmark KOSPI bourse.
Market analysts expect STIC will sell additional shares when the lock-up period is over on Jan. 15. The PEF agreed earlier it would not sell 70 percent of its stake in Big Hit for three months after its listing, to reduce the market overhang impact. Market overhang refers to a buildup of selling pressure for a stock among traders, who have mostly held back due to fear of a decline in the stock's value.
“The stock price of Big Hit dropped 45 percent from its highest price after its listing on Oct. 15, due to concerns over market overhang,” KB Securities analyst Lee Sun-hwa said. “The amount of institutional investors' stake to be exempt from lock-up within a month reaches 1,322,416 shares, 3.9 percent of the outstanding shares.”
STIC's divestment has already dealt a severe blow to Big Hit's stock price.
The K-pop agency's stock price briefly reached 351,000 won, double the offering price of 135,000 won, on the first day of its listing. After STIC carried out a massive sell-off that day along with another investment firm, Mainstone, however, its closing price fell to 258,000 won.
Big Hit's stock price has continued to fall over the past two months, following additional sell-offs by its major shareholders. After STIC carried out a block deal last Thursday, the stock price dropped to 161,500 won. The closing price of Big Hit shares was 154,500 won, Tuesday.
STIC has remained cautious about its next step because it signed a confidentiality agreement with Big Hit when it made the investment.
In October 2018, the PEF invested 104 billion won in the entertainment agency. The fund it used for the investment was created four years ago. Given that PEFs generally pursue their exit strategies five years after their fundraising, STIC is expected to make more efforts for divestment next year, before the Big Hit stock price drops further.
Industry officials expect STIC will continue to sell a few shares at a time, rather than putting its entire stake on the market all at once. According to industry officials, the company has already made a 127.4 billion won profit from selling its Big Hit shares. The PEF will partially take the profit as incentive, after redistributing the money to its investors.
Having earned such a handsome profit from its investment in Big Hit, STIC appointed Chai Jin-ho, head of investment division 2, as the head of the newly established large-cap division, Monday.
Chai is known as the person who directed STIC's investment in Big Hit. He was appointed a Big Hit nonexecutive director in November 2018 to give advice on its management. He left the entertainment firm Oct. 13, two days before its listing.