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Big Bang’s YG Overcomes Marijuana Scandal to Price IPO Above Offer Range

South Korea’s YG Entertainment Co. priced its initial public offering above a range offered to investors as growing interest in Korean pop music overshadowed a marijuana scandal involving the boy band Big Bang.

Seoul-based YG, which manages the band, will raise 42.4 billion won ($38 million) from selling almost 1.25 million shares for 34,000 won each, the company said in a regulatory filing yesterday. Stock in the IPO had been offered at 22,100 won to 28,800 won. The label plans to list its shares on South Korea’s junior Kosdaq Index (KOSDAQ) on Nov. 23, it said.

YG is aiming to copy the success of listed rivals S.M. Entertainment Co. and JYP Entertainment Corp., whose shares have almost tripled this year amid the increasing overseas popularity of Korean pop, or “K-pop.” YG lowered the indicative range for its IPO in October after G-Dragon, the leader of Big Bang, tested positive for marijuana use.

“YG’s offered price range was very attractive, and that drew hot interest from institutional investors,” Kim Shiwoo, an analyst with Korea Investment & Securities Co., said by phone. “While the recent marijuana scandal of its singer gives a bit of concern, investors seem to bet that the expected growth trend of the company’s earnings remains intact as it tries to do more business overseas.”

Retail orders for stock in the IPO will be taken on Nov. 14-15, YG said in yesterday’s filing. Institutional investors at home and overseas showed “strong” interest in the share sale, the company said.

Marijuana Use

Big Bang and its members accounted for more than half of the company’s total sales in 2010, YG said in revised prospectus on Oct. 18 when it cut its IPO price range. The band’s concerts may be delayed and revenue from commercials could fall, the company said.

G-Dragon, whose off-stage name is Kwon Ji Yong, accepted what he thought was a regular tobacco cigarette from a fan during a tour of Japan in May and took “two or three puffs” before throwing it in a toilet, the company said in a statement on Oct. 5.

K-pop acts promoted by S.M. Entertainment dominate the nation’s music charts. S.M.’s biggest boy band, Super Junior, and main female group Girls Generation were the top album sellers last year, according to the Hanteo music chart.

New Artists

Girls Generation’s videos, including “Run Devil Run,” and Super Junior’s “Mr. Simple” have generated tens of millions of views globally on Google Inc.’s YouTube. In France, hundreds of fans gathered in front of the Louvre on May 1, demanding S.M. hold another showcase of its artists in Paris after about 7,000 tickets for a June concert sold out in 15 minutes.

YG plans to use the proceeds from its share sale, arranged by Daewoo Securities Co., to increase its pool of new artists, add production staff and open offices abroad.

The company is headed by Yang Hyun Suk, a former member of Seo Taiji and Boys, a 1990s trio that mixed pop, rap, rock and techno to become cultural icons in Korea. Yang, 41, is YG’s biggest shareholder with a 48 percent stake. The company posted net income of 7.2 billion won in the first six months of this year, from 5.6 billion won a year earlier.

S.M. Entertainment rose 4.8 percent to 51,300 won as of 9:57 a.m. in Seoul today. JYP Entertainment climbed 6.2 percent, while the benchmark Kospi Index (KOSPI) gained 0.8 percent.

The Kospi has dropped 11 percent in 2011, a slump that contributed to a decline in IPOs. Companies have raised 3.25 trillion won in IPOs in South Korea this year, compared with 10.36 trillion won for all of 2010, according to data compiled by Bloomberg.

-- Editors: Darren Boey, Allen Wan

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net;

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