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Big Hit Entertainment Co., the managerial label behind K-pop sensation BTS, debuted with a bang, but its dramatic crash after a pop on the first day of trading is prompting South Korean regulators to seek safeguards for investors. moms and pops.
Riding on the success of scoring Korea’s first ever no. 1 hit on Billboard’s leading US music chart in September, BTS ‘management agency went public in October as one of the hottest listings in town.
But the entertainment agency’s listing has since been the subject of protest from retail investors, as many have asked for “refunds” after a drop of more than 52% from a peak of 351,000 won ($ 314.80) a year. quota reached on the first trading day, 15 October.
The stock is now trading at 158,000 won per share, slightly above the initial public offering (IPO) price of 135,000 won per share.
“I used the money I was saving for my wedding to buy Big Hit stock at around 300,000 won, worth 50 million won ($ 44,842.65). Is there a way to get the refund if I show the receipts and submit a petition of some kind? ”wrote one of hundreds of investors discussing ways to redeem stock purchases in an investment forum on the local Naver portal.
South Korea’s IPO market has similarities to a lottery. Retail investors can borrow as much as possible to subscribe as many shares as possible. But because orders vastly exceed the amount of shares made available to retail investors, usually 20%, many end up buying only after the shares are listed.
Even as BTS fans piled up in the Big Hit IPO, interest from institutional investors has been far less frenzied. Some large investors, including STIC Investment Inc and Mainstone LLC, sold huge amounts of Big Hit shares in the first week of trading, data from the financial supervision service showed, prompting an internal search among Korean regulators.
“Due to the massive backlash regulators are subjecting to the collapse of the Big Hit, a popular idea among officials is to add safety nets for retail investors by applying the mandatory holding period to more people. institutional investors, “a Korean official said. Financial Investment Association, an industry body representing top institutional investors.
“But adding another level of mandatory holding period for large investors would be a mistake, because it will seriously discourage those with big money from jumping in,” the official said, asking not to be named due to the sensitivity of the matter.
Government officials at the Financial Supervisory Commission declined to comment.
In South Korea, regulations only require the largest shareholder and related parties to hold shares for at least six months.
STIC and Mainstone were not subject to any mandatory holding period rules because they had invested in Big Hit prior to the book creation process, a Korea Exchange official said.
“The bottom line is that regulators won’t be able to prevent sales. But the IPO review could aim to strengthen the mandatory holding period and increase allocation portions for mom and pop investors at the same time.” , said Choi Yoo-june, an analyst at Shinhan Investment Securities.
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