HYBE faces escalating FSS scrutiny over pre-IPO collusion suspicions

HYBE Chairman Bang Si-hyuk / Courtesy of HYBE

HYBE Chairman Bang Si-hyuk is coming under intensifying scrutiny from the financial authorities over suspected collusion with private equity funds (PEFs) prior to the entertainment titan’s initial public offering (IPO) in 2020, market watchers said Tuesday.

The Financial Supervisory Service (FSS) probe follows the 400 billion won ($284 million) the authorities believe resulted from a deliberate failure to disclose “bonus” deals Bang had with the PEFs before the listing. The deal granted him a 30 percent “cut” of profits from the PEFs' shares sold in a successful IPO.

Central to the issue is whether Bang’s profit was rerouted through the PEFs in an apparent bypass of the legal lock-up period that precludes corporate insiders, investors and employees from selling or redeeming their shares for a predetermined period after an IPO.

Bang can avoid liability on a technicality. The deal was signed when HYBE was an unlisted firm, exempting it from the disclosure obligations. However, retail investors are up in arms since the offer price of 270,000 won tanked to 140,000 won within two weeks of the IPO.

“We are looking into whether the PEFs and Bang discussed the timing of the IPO plans,” an FSS official said.

The investigation zeroed in on Easton Equity Partners, a short-lived private equity of which two of three registered directors were close underlings of Bang.

It was founded in 2019, only a year before the IPO, and closed in December 2021.

The FSS believes the private equity increased holdings in HYBE shares, knowing the exact timing of the IPO plans. The suspicion can warrant an expanded probe into allegations of market manipulation.

HYBE maintains the deal had no legal issues. 

“The IPO was managed by underwriters in full compliance with related laws and regulations,” it said in a corporate filing on Friday.

HYBE shares ticked down to lower than 200,000 won over the past week. It lost a combined 10 percent in the last three sessions.