HYBE investors have had a week to digest the news of BTS‘ “hiatus” and mull its financial implications. They received reassurances from HYBE that the band remains active. They took in additional news about the individual members’ upcoming solo projects. This week, investors saw Proof, the group’s career retrospective, debut atop the Billboard 200 album chart.
Still, stock for HYBE — the band’s management company, label and agency — has failed to recapture its initial losses. HYBE’s share price was steady since falling 24.9% on June 15, the day after BTS members announced the group will go on “hiatus” during an hourlong FESTA dinner video. That one-day drop wiped out $1.7 billion of market value. After closing at 145,000 KRW that day, HYBE shares closed between KRW 148,000 and KRW 149,500 over the next four trading days.
On Wednesday (June 22), HYBE shares dropped an additional 6.7% to KRW 139,500. This coincided with the Korea Composite Stock Price Index falling 2.7% as recession fears spread across the country and the South Korean won fell to its lowest value against the U.S. dollar in 13 years. That left HYBE shares down 27.7% since news of BTS' planned break and down 60% year to date.
While losing a quarter of market capitalization might seem like a drastic reaction, investors' sentiment matches the assessments of analysts who follow HYBE. In the days following BTS' announcement, four Korean equity analysts lowered their HYBE price targets an average of 25.5%. One analyst dropped the forecast for HYBE's operating profit 25.7%. Another analyst cut his forecasts for revenue by 32% and operating profit by 54%.
Investors hate uncertainty, and there is a good amount of uncertainty surrounding the length of BTS' break and the rollout of its members' solo projects. Even if an investor assumes some of the group's seven members will have successful solo projects, HYBE is unlikely to replace BTS' lost touring income. In 2019, when BTS accounted for roughly 85% of HYBE's revenue, concerts accounted for about a third of overall revenue on the strength of the group's Love Yourself world tour. That year, BTS ranked third on Billboard's 2019 year-end Boxscore chart after grossing $196.4 million from 1.6 million attendees to 42 shows. Only Ed Sheeran and P!nk took in more ticket revenue that year -- albeit with lower per-show grosses.
HYBE's 2021 acquisition of Ithaca Holdings diversified the company by adding Big Machine Label Group and SB Projects, among other companies. Its success with other K-pop groups, such as Tomorrow X Together and Enhypen, have also reduced BTS' share of its revenue mix. One Korean analyst put BTS' share of HYBE's revenue at 60% in 2021, down from 85% in 2020 and 97% in 2019.
Investors have had a week to consider the potential of BTS members' solo projects. They have also had a chance to absorb HYBE's public relations messaging that stressed BTS will remain active and is not officially going on hiatus. The fact that HYBE's stock price didn't rebound over the last week suggests investors are sticking with their initial reaction and analysts' assessments that HYBE won't have an answer for lost BTS touring revenue.