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K-Pop's Big 4 Legal Matters & Stock Projections: HYBE, SM, YG and JYP Entertainment

CNBC talked to Goldman Sachs and Morgan Stanley about their prospects for the major Korean-entertainment companies as U.S. and Korean outlets report on their ongoing legal matters.

—BTS Is back, BLACKPINK’s on Tour. Here’s What It Means for High-Flying K-Pop Stocks: “South Korea’s ‘Big Four’ K-pop agencies [HYBE, SM, YG and JYP Entertainment] are all listed and most of them have seen massive gains in share prices this year as big names return and investors foresee a better year for the sector…prospects and outlook Goldman Sachs said in a note last month that investors should look for ‘Mega IPs’ in K-pop — groups that can attract an audience of over 1.5 million per tour. That level reflects that a band has been able to break past K-pop’s traditional target markets into the Western music scene, the firm said. Currently, only four groups meet this criterion. ‘The common denominator of the four K-pop Mega IPs is that they are also the only K-pop bands capable of a full stadium tour in the U.S,’ Goldman said, adding that other, newer groups have not seen such success.” (CNBC)

Here’s how Goldman Sachs and Morgan Stanley feel about each company:

  1. HYBE: “Goldman's ‘top pick’ as its boy groups ENHYPEN and SEVENTEEN are on the verge of commencing full stadium tours in the U.S. and becoming Mega IPs.”

  2. SM Entertainment: “While Morgan Stanley said the company was its top pick due to its well-diversified portfolio of artists, Goldman pointed out that SM lacked a track record of producing Mega IPs, with none of its groups having reached that status.”

  3. YG Entertainment: “Both firms are pessimistic on YG, despite the fact that the agency is home to the popular Blackpink. ‘We believe expectations for BLACKPINK has been over reflected in share price. High reliance on single IP and shallow slate of performers remain a concern,’ Morgan Stanley said. YG currently has just three active groups: Blackpink, boy group TREASURE, which debuted in 2022, and rookie girl group BABYMONSTER, which entered the industry in 2024.” (The company also has WINNER and AKMU, although neither are going to be stadium fillers in the U.S. at the moment so maybe it’s a moot point)

  4. JYP Entertainment: “While JYP has two of the four so-called Mega IPs, Goldman notes that it sees short-term earnings turbulence, due to its reliance on just a few mature artists and contract renewal of Stray Kids, which will limit margin expansion in the short term. When artists renew their contracts, they typically take a higher share of the revenue split, according to Jiwoo Oh, a research analyst at investment firm CGS International Securities Korea. K-pop artists sign an initial standard seven-year contract with their agencies, which means that Stray Kids, having debuted in 2018, should be reaching the end of their contracts this year. Morgan Stanley, in a June 26 note, said that ‘the absence of new performers in JYP continues to be a weak point. We believe the stock needs to see more artists contributing to top line growth, and new teams emerge to support longer-term growth.’”

According to the CNBC article by Lim Hui Jie, there are only four Mega IPs of artists who can hold stadium tours in the U.S., which must be BTS, TWICE, BLACKPINK and Stray Kids.

But ATEEZ, from the unlisted KQ Entertainment, really shouldn’t counted out: the group has five stadium dates on the U.S. leg of their In Your Fantasy World Tour alongside arena shows.

  • Somewhat related news: I didn’t expect to hear Daddy Yankee’s comeback single would be released through HYBE Latin America: “Yankee’s return is the first major artist partnership deal under HYBE Latin America, which has been rapidly expanding. On July 9, HYBE Latin America unveiled their new Latin-focused competition series ‘Santos Bravos,’ which aims to create an all-male band through intensive training.” (Variety)

IN THE NEWS

South Korea Refers HYBE Chairman Bang Si-Hyuk to Prosecutors Over IPO Allegations: “The Capital Market Investigation Deliberation Committee held a meeting on Monday, July 7, and concluded that Bang Si-Hyuk and several others should face criminal charges. The recommendation has been passed to the Financial Services Commission’s Securities and Futures Commission and is scheduled for review at its upcoming meeting on July 16,” writes a new article on Billboard without a byline but attributed to the general “Billboard Korea.”

“At the center of the case is a controversial series of private equity transactions made in 2019, just before HYBE began its IPO process. Bang is accused of falsely assuring early investors that the company had no plans to go public, persuading them to sell their shares to a private equity fund allegedly controlled by one of his associates. In reality, HYBE had already initiated the IPO process, including selecting a designated auditor —an early and mandatory step in a Korean public offering. Despite this, investors sold their shares based on Bang’s assurances. HYBE later debuted on the Korea Exchange in October 2020, with its IPO priced at 135,000 won per share (approximately $115 at the time). The stock price surged to as high as 420,000 won shortly after listing. Authorities allege that Bang ultimately gained about 400 billion won (approximately $291 million) through the undisclosed deal, reportedly receiving a 30% stake in the profits from the private fund.” (Billboard/Billboard Korea)

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