Big Hit Entertainment, the record label behind popular K-pop boy band BTS, is now publicly trading on the KOSPI. The stock opened at 270,000 won (USD$235) and saw a surge in price its first day, followed by a second-day drop.
Volatility immediately after an IPO isn't unusual, and it's too early to tell what the long-term movement of the stock could look like. If you're willing to bet that the label's value will grow, the best way for US investors to gain exposure is by purchasing an ETF that invests in South Korean stocks.
How to invest in Big Hit Entertainment from the US
Because Big Hit Entertainment’s stock will only be available on the South Korean market, it may be difficult for US investors to buy stocks. But there are a few different ways you can gain exposure.
1. Buy ETFs
The easiest way to gain exposure to South Korean stocks is invest in exchange-traded funds (ETFs) that offer international coverage — specifically those that invest in South Korean stocks, like Renaissance Capital’s International IPO ETF or the iShares MSCI South Korea ETF. While this doesn’t allow you to buy Big Hit Entertainment stock directly, it does give your portfolio exposure to South Korean stocks — possibly including Big Hit.
2. Wait for an ADR
You may also be able to invest in Big Hit Entertainment by purchasing American Depositary Receipts (ADRs) — certificates that represent shares of foreign stock that can be purchased from a domestic brokerage account. While there’s no guarantee that Big Hit Entertainment will release ADRs to US investors, it’s a possibility given the popularity of its IPO.
If you decide to purchase an ETF or wait for an ADR, you’ll need a domestic brokerage account. Compare your options to find the best fit.
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3. Use an international brokerage account
Most US brokerages only offer access to US stock exchanges, like the NYSE and NASDAQ. If you want to buy Big Hit Entertainment stock directly, you’ll need an international brokerage account. But even then, it may be difficult. Most brokerage accounts available in the US, including Interactive Brokers and Fidelity, don’t offer access to the South Korean markets.
South Korea places restrictions on foreigners buying stock, which means that to invest you’ll need to do extensive research and fill out the appropriate paperwork. This option is best suited to advanced investors who plan to buy stocks in South Korea on a regular basis and/or make high-dollar investments.
What we know about the Big Hit Entertainment IPO
Demand for Big Hit Entertainment’s stock is high among retail and institutional investors alike. In fact, some 1,420 institutional investors wanted pre-subscription access to Big Hit’s IPO, amounting to 1,117 times the subscription amount allotted to institutional investors.
The stock was originally expected to cost 135,000 won, but ended up opening much higher at 270,000 won (USD$235). The stock launched on October 15 in South Korea, and is now trading on the KOSPI. The company's pre-IPO valuation stood at $4.1 billion, making this South Korea’s biggest IPO since 2017.
Unfortunately, shares aren't be available on any US domestic exchanges, and so far we haven't heard anything suggesting the company is planning to launch a US IPO. If you want to purchase stocks from the US, you'll need an international brokerage account.
Company history
Big Hit Entertainment is an entertainment company founded in 2005 by Bang Si-hyuk and headquartered in Seoul, South Korea. With nearly 800 employees, the company manages and produces music for a number of K-pop groups and solo acts, including J-Hope, Lee Hyun, TXT and boy band sensation, BTS — the cause of Big Hit’s IPO buzz.
Despite managing numerous solo performers and groups, most of Big Hit Entertainment’s incoming cash comes from BTS. In 2019, 97% of the company’s revenue was BTS-related. And now that the company is going public, fans of the seven-member K-pop idol group are clamoring to get their hands on a slice of what’s being referred to as BTS stock.
The good news is that the members of BTS are profiting from Big Hit Entertainment’s IPO — as they should. The company awarded each member of the band 68,385 shares, amounting to $7.9 million apiece.
How do similar companies perform?
It's impossible to predict how any stock will perform — and IPOs can be particularly volatile. Looking at the performance of similar companies can help you decide if now is a good time to buy Big Hit Entertainment stock.
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