BTS Military Service: Uncertainty over enlistment conditions lead to HYBE labels' stocks declining by 10 billion dollars

Amidst the uncertainty concerning BTS' mandatory military service, HYBE Co. reportedly suffered a $10B loss over the past year in market capitalization. The stocks have gone below the IPO price and are currently down by 70% from their peak position.

The losses seem to result from the uncertainty around BTS' enlistment issue. The South Korean government's response has been unclear as they are also concerned about the mixed reactions from the fanbase.

HYBE has been trying its best to counter the losses by investing in AI, IT technologies, and NFTs (Non-Fungible Tokens).

Non-Fungible tokens are unique assets on a blockchain with unique identification codes and metadata that differ from the other. They cannot be traded or exchanged like a cryptocurrency since no two are equal or similar. NFTs can represent items like artwork or real estate and usually command a price in cryptocurrency.

HYBE Co. was also recently seen acquiring Supertone, an AI voice developer, for a sum of $40M. Supertone was first featured in the singing show AI vs. Human.

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A trend of HYBE's stock prices in the past year

Entertainment companies in Korea have all seen stocks plummeting during the pandemic. In a report published in May 2022, all major companies had stock prices falling due to the New York Stock Exchange, Bitcoin, and International Oil prices crashing simultaneously.

Given the rising Covid cases in the US, companies were wary of scheduling foreign activities for the various K-pop groups. Most of them started to diversify businesses to boost growth.

However, HYBE Co, has been particularly struggling with the issue of BTS' military enlistment. The company has seen multiple rises and falls in its stock prices depending on the nature of news circulating in public about the boy band' exemption.

BTS' hiatus news on June 14, 2022, saw the shares values dropping by 25.65% compared to levels on June 13. A comment made by the current Defence Minister of Korea Lee Jung-sup, that the government's decision will depend on public opinion. This led to HYBE's shares tanking by 8.27%.

Multiple surveys have been conducted with varying results. A survey by Realmeter done between September 14-15 showed that almost 61% of the participants were open to the idea of popular artists serving alternative military duties instead of mandatory military service. This news led to stock prices rising by 2.27% in the market.

Another survey showed that 54% of the public was against the exemption proposal. HYBE saw a loss of 4.18% again.

Multiple statements given by legislators from the opposition party in Korea and those in the government have led to the continuation of suspense regarding the group's future.

BTS will be performing at the World Expo in support of Korea's bid for 2030 in their role as the PR ambassadors for the event. The assemblymen from the Democratic Party of Korea have presented a bill proposing BTS and other popular celebrities to serve alternative military duties, and the septet's upcoming concert seems to be a way to do the same.

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HYBE Co. has started diversifying its revenue from various groups and businesses

HYBE Co. has tried to diversify its revenue stream by launching two new girl-groups, NewJeans and Le Sseraffim, and a boy group, ENHYPEN, through their subsidiary companies and joint ventures with other media houses.

The entertainment company now owns a 100% share of ADOR entertainment (home to NewJeans) and Big Hit Music (BTS and TXT's agency), and 85% of Pledis Entertainment (SEVENTEEN's music label).

HYBE also owns 80% shares in Source Music (home to former K-pop group G-Friend and currently LeSserafim), 66.7% of KOZ Entertainment (soloist Zico's label), and has a 45% stake in BELIFT Labs, a partnership that helped with the launch of ENHYPEN.

BTS, TXT, and SEVENTEEN's albums and concert sales have had a positive effect on shares. However, Le Sseraffim and NewJeans' success have also significantly raised expectations for their future releases.

In May 2022, HYBE spun off the game metaverse division HYBE IM, which was established as another subsidiary company. Many people from the game companies were recruited, including former Nexon director Jung Woo Young. Considering that HYBE's current CEO, Park Ji-won, used to be the CEO at Nexon, it was analyzed that HYBE is comprehensively entering the gaming industry as well.

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Despite HYBE's efforts, BTS' popularity remains the biggest driving force in their revenues, and any negative news regarding the group overrides any positive gains that the company might have made in any other way.

It is imperative that the final decision comes out so that the company can have a clearer picture and finalize its future steps. With the eldest member, Jin, turning 30 this year, the final order of the government may be expected soon.