As YG PLUS acquired the convertible bonds (CB) issued by FNC Entertainment Co. (FNC Entertainment), which has failed to escape years of operating losses, attention is focusing on the background. The market reads it as a strategic investment aimed at securing music and concert distribution rights, alongside expectations for earnings improvement driven by P1Harmony's growth.
According to the Financial Supervisory Service's electronic disclosure system on the 20th, FNC Entertainment will issue the fourth CB worth 12 billion won. A CB is a bond with a condition allowing conversion into stock. The company plans to split the funds into 4 billion won this year and 8 billion won next year for artist investment and content production. The coupon interest rate and the maturity interest rate are each 3%. The conversion price is 4,638 won.
The reason FNC Entertainment is issuing CBs lies in its chronic loss-making structure. The company has long suffered from weak results. However, over the past three years, operating losses have narrowed from 8 billion won to 4.2 billion won and 600 million won, showing signs of improvement. With a debt ratio of about 473%, the financial burden is high, and current liabilities exceed current assets by 1.6 times, sustaining the need to raise funds.
What the market is watching in this investment is the acquirer. YG PLUS, an affiliate of YG Entertainment, runs music distribution and platform businesses. Given the industry's typical structure of securing distribution rights alongside investment, YG PLUS is seen as moving to obtain FNC Entertainment's music and concert distribution rights through this deal. YG PLUS currently does not hold FNC Entertainment's distribution rights.
The key backdrop for this investment is the rapid growth of the boy band P1Harmony under the label. Since its 2020 debut, P1Harmony has quickly expanded its global fandom, simultaneously lifting album sales, overseas tours, and merchandise (MD) revenue. In fact, the profit contribution from younger-year artists rose from 3% in 2023 to 59% in 2025.
Park Chang-yoon, an analyst at GL Research, said, "P1Harmony, based on the expansion of its global fandom, is simultaneously driving growth in album sales, North American tours, and MD revenue, leading the turnaround in results," and noted, "The likelihood of turning a profit in 2026 is rising."
Some say the fact that exercising the conversion rights on this CB could secure about a 16.8% equity stake gives it meaning beyond a simple financial investment. The largest shareholder of FNC Entertainment is CEO Han Sung-ho (22.34%), and Suning Universal Media holds 20.53%. If YG PLUS exercises the conversion rights, it could become the third-largest shareholder.
YG PLUS said, "This is a strategic investment to expand synergy between the two companies, not an equity investment," adding, "We chose a CB structure that allows principal protection."
Still, the market interpreted news of FNC Entertainment's CB issuance as a negative on the day. After topping 5,000 won the previous day, the stock plunged nearly 17% on the 21st, sliding into the 4,200-won range. With the CB conversion price set at 4,638 won, the financial burden from the 12 billion won fundraising, potential equity dilution upon conversion, and overhang (potential selling volume) concerns all appeared to be reflected at once.