As expectations for improved earnings grow with BTS's comeback, HYBE has faced a setback in the form of Oner risk.
Police on the 21st sought an arrest warrant for HYBE Chair Bang Si-hyuk on suspicion of fraudulent trading.
Bang is suspected of having, in 2019 before HYBE's listing, provided information to existing investors and venture capital (VC) implying there were "no plans to list," then inducing them to sell equity to a private equity fund (PEF) set up by close associates who had served as HYBE outside directors.
HYBE later went public, and Bang is said to have reaped nearly 200 billion won in illicit gains by receiving about 30% of the post-listing sale profits through a confidential agreement concluded in advance with the private equity fund.
Bang's attorney said, "We regret that an arrest warrant was sought despite long-standing, good-faith cooperation with the investigation," adding, "We will faithfully engage in the legal process going forward and fully clarify the related suspicions."
Bang is currently chair of HYBE's board and takes part in major decision-making. He is also the largest shareholder, holding 28.86% equity in HYBE.
The market reacted immediately. As of 12 a.m. that day, HYBE shares were trading at 248,000 won, down 2.5% from the previous session. With the stock, which had recently moved in the 250,000-won range, turning weak, investor sentiment also appeared to be deteriorating. In mid-Feb., ahead of BTS's comeback, HYBE shares briefly topped 400,000 won as expectations were priced in.
This legal risk is likely to weigh especially on BTS activities. HYBE posted revenue of 2.6498 trillion won and operating profit of 49.3 billion won last year. The securities sector projected revenue of 4.2 trillion won and operating profit of 535.3 billion won this year on the back of BTS's comeback. Those figures represent increases of 58% and 985%, respectively, from a year earlier. BTS is a key artist accounting for more than half of HYBE's total revenue.
Bang previously worked as a BTS producer and played a key role in BTS's rise. While day-to-day operations are now handled by company teams, he is still said to be involved in BTS albums and major activity directions. The theme of this BTS comeback album, "Arirang (ARIRANG)," was also reportedly proposed by Bang and decided after discussion with BTS.
BTS recently finished concerts in Japan and is set to begin a U.S. tour on the 25th. Given the high share of global activities, on-site responses by management are important, but Bang is currently under a travel ban. The U.S. Embassy in Korea requested cooperation for Bang and management to travel to the United States for reasons including the BTS world tour, but police did not accept the request.
An entertainment industry official said, "With expectations of an earnings rebound growing thanks to the BTS comeback, Oner risk is coming to the fore and could weigh on corporate image and investor sentiment," adding, "At a time when global business is critical, concerns about a management vacuum will also act as a variable."