HYBE Chairman Banned from Investing in His Own Close-Aid Fund; Four Institutional Investors Actually Examined Acquisition Options

Contrary to allegations that HYBE Chairman Bang Si-hyuk granted preferential treatment only to his own close-aid fund, it was revealed that several top-tier professional investors also had the opportunity to acquire existing shares of HYBE during the same period. A total of four institutional investors considered making investments when the deal to purchase HYBE’s existing shares was pursued in 2019. Three of them—American firms A and B, along with a Japanese firm S—secured investment opportunities at the same time as “E-Tion 2.” Some of these investors showed such strong interest that they even conducted due diligence to assess their eligibility for investment. However, ultimately no one acquired HYBE’s existing shares. It is reported that factors such as HYBE’s risk associated with being BTS’s exclusive agency, differences in valuation expectations, and concerns over market conditions prevented the institutional investors from proceeding with their investments. Notably, the military service obligations of BTS members still posed a lingering risk at that time. While SM Entertainment, a KOSDAQ-listed company used as a comparison, had a market capitalization of only 901.5 billion won by the end of 2019, the deal to purchase HYBE’s existing shares was structured around 1.2 trillion won. It was a highly challenging transaction requiring HYBE, an unlisted company, to be valued at a higher level than SM Entertainment, the largest company in the industry. Rapid increases in valuation also dampened the enthusiasm of institutional investors, as the value assigned when Stick Investment acquired HYBE’s existing shares in October 2018 was 850 billion won, yet it rose by over 40% within just over a year. With all institutional investors pulling out of the deal, “E-Tion 2” ended up acquiring all of the existing shares held by the previous financial investors in November 2019. An industry insider evaluated this outcome not as “exclusive preferential treatment” but as a result of “the market’s sober judgment.” Meanwhile, Chairman Bang Si-hyuk is facing charges under the Capital Market Act for allegedly inducing his close-aid fund to invest in HYBE and thereby securing an unjust profit of 200 billion won.