|BTS performs during a recent online concert series held on Oct. 10 and 11 in Seoul. / Courtesy of Big Hit Entertainment|
More than half of institutional investors’ shares are subject to less than one-month lock-up period
By Anna J. Park
Ahead of Big Hit Entertainment’s much-expected listing on the nation’s benchmark KOSPI on Thursday, investors are watching whether the initial stock prices of K-pop band BTS’ management company could hit the price-soaring limit of 30 percent in the first few days, and continue bullish movements in the near future.
As of Tuesday, stock owners of the entertainment company’s yet-unlisted stocks are asking for prices of 350,000 won ($304) to 370,000 won at local over-the-counter markets, including 38 Communication. Given that the stock’s offering price during the heated subscription period was 135,000 won, it seems that investors generally consider the stock’s value to be at least double or nearly triple from the current price.
The issue that could cloud the stocks’ further rise is institutional investors’ rather short lock-up period, compared to earlier successful IPO cases.
Institutional investors subscribed to about 4.28 million stocks, which is about 60.06 percent of the entire offering amount of 7.13 million stocks. More than half, exactly 57.31 percent, of the institutional investors’ owned stocks are subject to a lock-up period of less than one month.
It means that a massive amount of the shares owned by institutional investors could be sold within a month, which would likely cause the stock price to fall. Another 17.87 percent of the institutional investors’ stocks are subject to a three-month lock-up period, while the remaining 24.83 percent are bound by six months of ownership.
When compared to previous major IPOs this year ― SK Biopharmaceuticals and Kakao Games ― the companies’ stock prices also fell when the institutional investors’ lock-up period was over.
Kakao Games’ stock price fell by nearly half within a month after it went public, once institutional investors’ one-month lock-up period ended. The stock price of the gaming affiliate of the IT company closed at 49,100 won on Monday, a 40 percent fall from 81,100 won, the closing price on Sept. 11.
Early inclusion on KOSPI 200 Index?
Some market watchers say it’s still too early to forecast that the entertainment company’s stock price will fall within a month. There’s a high possibility the firm’s stocks could be included in the KOSPI 200 Index, which is set to change its included companies at the end of December.
“When calculated as of the trading session of Oct. 5, the requirement for the early inclusion into the KOSPI 200 Index would be that a company’s average daily market cap during the first 15 days after the IPO exceeds 4.5 trillion won. It means if Big Hit Entertainment’s stock price average continues to hover above 133,920 won, the stock is highly likely to be included in the KOSPI 200 Index,” Kim Dong-wan, analyst at Eugene Investment & Securities, said during a phone interview.
“Once included, the company’s stocks will be automatically sought out by institutions that operate financial products tracking the KOSPI 200 Index. It could be a boon for the stock’s future moves.”
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