HYBE reported third-quarter earnings that exceeded market expectations this year, yet its stock price continued to plunge, falling close to its initial public offering (IPO) price.
According to the кσяєα Exchange (KRX) on November 5, HYBE shares closed at KRW 138,000 (approximately $103) in the previous trading session, marking a sharp decline of 11.48%. The stock price is now approaching its IPO price of KRW 135,000 (approximately $101) when the company was listed on October 15, 2020. Since reaching an all-time intraday high of KRW 405,500 (approximately $303) on February 13 this year, the stock has been on a continuous downward trajectory. HYBE's market capitalization has also shed more than KRW 8 trillion (approximately $6 billion) this year, falling to around KRW 6 trillion (approximately $4.5 billion).
The stock's continued struggle to recover has left a large number of retail investors facing substantial unrealized losses. According to Naver Pay's MyData service, the average purchase price among 14,636 HYBE investors was KRW 256,578 (approximately $192), representing an average loss of up to 45.86%. On HYBE's online stock discussion boards, individual investors shared frustrated reactions such as, “At this rate, long-term investing will leave me completely broke,” and “Cutting my losses and switching to Samsung Electronics was a genius move.”
Notably, the stock plunged even as HYBE announced its highest-ever quarterly earnings the previous day. The company's third-quarter revenue reached KRW 1.5257 trillion (approximately $1.14 billion), up 109.8%, while operating profit returned to positive territory at KRW 188.5 billion (approximately $141 million). Operating profit also significantly exceeded the market consensus, with securities firms forecasting an average of approximately KRW 164.5 billion (approximately $123 million).
Securities analysts believe the sell-off was driven by the company's failure to provide clear details about the future activities of its artists, particularly its flagship IP, BTS, during the earnings briefing. One entertainment industry analyst commented: “The company's failure to give a definitive answer about BTS's future activities has caused investor concerns to spread.”
During the third-quarter earnings call, CEO Lee Jae-sang faced a barrage of challenging questions about BTS's contract renewal and the potential growth gap following the conclusion of the group's world tour. He did not directly confirm the status of any ongoing contract negotiations. Instead, he simply stated that BTS would continue their world tour through the first half of next year, while group and solo activities following the tour were also being prepared.
The HYBE CEO also explained that, given the nature of the concert touring business, schedules are generally announced only six to nine months in advance. No music company anywhere in the world announces album release schedules or artists' individual activities a full year ahead of time.
Attempting to dispel market concerns, Lee emphasized: "BTS’s monumental achievements have somewhat overshadowed the rapid growth of our rookie and next-generation artists. Our multi-home IP portfolio—which achieves in 1–2 years what used to take 4–5 years—proves HYBE’s solid fundamentals."
He went on to strongly push back against concerns about the company's excessive dependence on BTS: "In 2023, when BTS members enlisted, people said the company would collapse. The market questioned how revenue and profits could be maintained when BTS accounted for over 80% of sales, but the result was growth."
Even after moving on to the second question, CEO Lee proactively requested additional time to continue explaining his position. He spent considerable time highlighting the achievements of rookie and emerging artists such as CORTIS, KATSEYE, &TEAM, and Santos Bravos.
However, the CEO's response only heightened shareholder concerns, as HYBE's actual financial performance continues to demonstrate that a substantial portion of its profits remains dependent on BTS's activities. Meanwhile, after an audio recording of the earnings call circulated on social media, BTS fans reacted strongly, accusing the CEO and HYBE of showing a lack of respect toward the group.
Nevertheless, securities analysts believe HYBE is currently adjusting its BTS-related schedules, with the expectation that these uncertainties will gradually be resolved. Lim Do-young, an analyst at Daol Investment & Securities, emphasized, "Additional tour dates for BTS are expected to be disclosed as early as December or by early next year at the latest," adding, "The scale of the additional tour and the concrete format of their activities in the second half will be the key variables in mitigating any drop in earnings."
Lim Soo-jin, an analyst at Kiwoom Securities, projected, "This earnings release confirmed that BTS is preparing both full-group activities and solo albums following their world tour. As further disclosures of BTS's schedule continue, investor sentiment is expected to recover gradually." She added, "Given that profit contributions from junior intellectual properties (IPs) are set to expand significantly starting next year, we consider this an opportune phase to actively overweight the stock."
