By Kim Da-ye
Until early this year, the market wasn’t favorable toward talent agencies.
An application for an initial public offering (IPO) in the KOSDAQ market by YG Entertainment with big shot idol groups including Big Bang and 2NE1 was rejected last November.
Wonder Girls producer Park Jin-young apparently figured his agency running at a deficit wouldn’t pass the Korea Exchange (KRX)’s screening, so he chose to become the major shareholder of another listed talent agency, J.Tune Entertainment, in January.
Investors’ distrust in talent agencies as a result of a long history of back-door listings and poor earnings seems to have faded as Korean enetertainers gain visible popularity not only in developing countries, but also in advanced nations such as Japan and France.
Shares of entertainment companies continue to rise against the downturn in the stock market. The value of an S.M. Entertainment share, for instance, more than doubled in three months ― from 19,450 won on June 21 to 40,950 won Wednesday ― while the benchmark KOSPI dropped more than 10 percent from 2,048.17 to 1854.28 points.
The bull market for talent agencies has boosted the wealth of entertainers-turned-businessmen. Lee Soo-man, the chairman of S.M. Entertainment and a former singer, is the most stock-rich celebrity, according to Chaebul.com, with his 24.43 percent stake valued at 165.70 billion won as of Tuesday when the price hit a record high.
The website gathering information about the affluent and conglomerates also ranked S.M.’s leading singer BoA with a 1.25 percent stake worth 4.1 billion won at sixth on the list and Ahn Chil-hyun, a former boy band member and current S.M. executive, with a 0.35 percent stake worth 1.15 billion won at eighth.
Chaebul.com ranked Yang Hyun-suk, the CEO of YG Entertainment and former member of Seo Taiji & Boys, as the second most stock-rich as the firm recently passed the KRX’s IPO screening on their second attempt.
The company is scheduled to go public in mid-October, and the website calculated Yang’s 47.73 percent stake at 83.88 billion won as its share closed at 47,000 won in the over-the-counter market.
While the sharp rise in S.M. Entertainment shares raises concerns of bubbles forming in the industry, experts said they climbed up based on earnings, not expectations.
Daewoo Securities Analyst Kim Chang-kwean said that the latest Girls’ Generation album released on June 1 sold more than 500,000 copies officially and is expected to sell 1 million by the end of the year. Kim said that it is priced at around 50,000 won ― more than triple the local price.
The talent agency also hosted the flagship SM Town Concert at the Tokyo Dome for three days between Sept. 2 and 4, amassing some 150,000 fans.
“The stock price is rising as the numbers have been confirmed,” Kim said.
Kim, however, warned of the trend of other entertainment firms’ shares ascending in conjunction and investors should know that only a few companies turn profits. He advised them to check in advance the firm’s earnings from this year and 2010.
Shin Jung-hyun, an analyst at Samsung Securities, added that investors should be aware of risks stemming from the industry’s unpredictability in that it is extremely difficult to forecast the success of a music album.
“In addition, while entertainers seem to earn good incomes abroad, Japan is the only profitable market,” Shin said.
S.M. Entertainment is planning to open three studios in Osan, Gyeonggi Province, to foster future Hallyu entertainers. According to a local business daily, the 185,025-square-meter land for the studios is located near plots of land belonging to family members of former President Chun Doo-whan.
The land in question has been mired in controversy surrounding Chun’s slush fund scandal and the land owners are expected to benefit from S.M.’s moving to develop the area, the newspaper said.