BTS made music historical past when it turned the primary Okay-pop band to high the Billboard Sizzling 100 chart with their blockbuster tune “Dynamite,” that includes lyrics penned in English. “Life is nice as honey, yeah, the beat is cha-ching like cash,” chant the seven-boy ensemble in a rap-like staccato. The rainbow-coiffed fellas scored one other smash when their administration firm, Bit Hit Leisure of South Korea, went public on Oct. 15. However the act might have been a much bigger monster, and masses extra South Korean gained can be cha-chinging if BHE hadn’t struck the fallacious notice by underpricing its IPO.
In response to information tales—the providing’s prospectus isn’t simply out there in English—BHE presold round one-fifth of its shares to institutional traders and its legions of followers on the equal of $118. That underwriting, led by J.P. Morgan and two Korean banks, raised $840 million in money. The shares seemed like such a cut price—and perhaps obtained the star remedy as a result of BTS is so adored—that the providing was reportedly 1,100 occasions oversubscribed by main funds, whereas the general public, led by its enraptured followers, obtained only one share for each 600 they utilized for.
As normal, when shares opened for buying and selling on the Seoul inventory change, the throngs who needed shares and couldn’t get them jumped in en masse, doubling the worth to $236 on the opening. By the shut, the inventory had cooled a bit to $225, nonetheless good for a 91% one-day acquire. BHE completed its first day as public firm with a market cap of $7.5 billion.
Sounds just like the IPO model of going double-platinum. But when BHE had managed to get full worth for the 7.1 million shares offered within the IPO, it will have garnered not $840 million, however $1.6 billion. So BTS’s house owners left roughly $760 million on the desk.
That’s s massive quantity. In response to a database assembled by Jay Ritter of the College of Florida, the nation’s main educational knowledgeable on IPOs, that phantom $760 million would rank among the many two dozen highest quantities forgone in all debuts on U.S. exchanges over the previous a number of many years. For the primary half of 2020, BHE posted EBIT of round $43 million and held $172 million in money. So amassing the additional $760 million would have multiplied its money holdings over 4 occasions. If BHE had obtained full worth as measured by the shut on Oct. 15, it might have offered 11% as a substitute of 21% of its shares. The founders and different backers would nonetheless be holding the additional 10% that they surrendered through underpricing.
These house owners embrace the seven teen idols who conquer the world’s levels as BTS. In response to revealed experiences, they maintain 68,385 shares every, or 479,000 in whole, for round 14% of BHE. On the second day of buying and selling, BHE shares fell 22%, chopping its valuation to $5.85 billion. Therefore, the group that reportedly accounts for over 80% of BHE’s revenues personal inventory price simply over $800 million. As soon as once more, sounds nice. But when BHE had gotten each gained for the IPO shares it offered, the BTS administration outfit would have $760 extra in its money coffers, and therefore a valuation the identical quantity, or 13% increased. Every of the seven rock stars can be $15 million richer.
Of their hit “Cypher Pt.3: Killer,” the boys mock rap singers who preserve doing the identical previous factor, grousing, “All of them nonetheless rap the identical approach like this,” and that “if you wish to be a chunk, make it unique.”
BTS are originals, to make sure, however they joined the Wall Avenue refrain and sang the identical previous, drained tune on their IPO.
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