Dispute to hardly affect HYBE’s earnings
HYBE’s stock price turned bearish for two consecutive days amid a dispute between the K-pop powerhouse and Ador, its subsidiary label responsible for launching NewJeans, a hugely successful girl group. However, analysts predict that the incident will have only a limited impact on HYBE’s earnings and the future musical endeavors of the girl group.
On Tuesday, the price of HYBE shares closed at 210,000 won ($152.39) after closing at 212,500 won, Monday, down 7.81 percent from the previous session, significantly reducing the company’s market capitalization from 9.6 trillion won to 8.8 trillion won.
News of an audit launched against the management of Ador, including CEO Min Hee-jin, caused the sharp decline in the stock price.
Accusing the Ador CEO of attempting to spin off the affiliate from the parent, HYBE sent a formal inquiry letter with a deadline on Tuesday. Currently, the Ador label is 80 percent owned by HYBE, with Min holding 18 percent, and the rest of the management team holding 2 percent.
On the other hand, Min asserted that the core issue started with Belift Lab, another subsidiary of HYBE, which copied NewJeans when creating a new girl group called ILLIT.
However, securities analysts forecast that the dispute will have a minimal impact on HYBE’s earnings performance. Retail investors also saw this as an opportunity for bargain
hunting, snapping up stocks that institutional and foreign investors had sold off.
“Ador’s contribution to HYBE’s earnings was 11 percent last year,” said Lee Hwa-jeong, an analyst at NH Investment & Securities.
Estimating Ador’s contribution at 14 percent this year, Lee noted that the ratio “will continue to decrease even more next year, with all members of BTS resuming their activities.”
Furthermore, the dispute is not expected to impact NewJeans’ future activities.
“NewJeans is under exclusive contract with Ador. As HYBE owns 80 percent of the Ador’s shares, NewJeans still falls within HYBE’s
intellectual property (IP),” Ahn Do-young, a Korea Investment & Securities researcher, said. “Both HYBE and Ador would not want to damage NewJeans’ IP, so it is unlikely their musical activities (anticipated in May) will be impacted by the dispute.”
Securities firms that issued reports on HYBE on Tuesday all maintained a “buy” investment rating along with their existing target prices of around 310,000 won.
However, according to Oh Ji-woo, an analyst at eBest Investment & Securities, the short-term price of HYBE’s shares will inevitably display volatility as Ador is audited.
Even though investors had feared
that the dispute would dampen the growth momentum of entertainment stocks, their impact is also considered to be limited.
Lee Jae-won, an analyst at Shinhan Securities, noted that entertainment stocks have continued to strengthen for the second consecutive trading day, driven by the perception that prices have bottomed out and expectations rise for a comeback by each leading group.
Notably, shares of another K-pop powerhouse, SM Entertainment, saw a strong upward trend on Tuesday, fueled by the successful debut of RIIZE and NCT WISH. The stock closed at 86,400 won, up 5.88 percent compared to the previous session.