Police are preparing to question Bang Si Hyuk, chairman of HYBE’s board, over allegations of fraudulent transactions tied to the company’s initial public offering (IPO), industry officials reported on August 21.
According to investigators, Bang allegedly misled early investors, including venture capital firms, by claiming HYBE had no plans for an IPO, while simultaneously arranging for shares to be transferred to a private equity fund linked to one of his associates. Once HYBE went public in 2020, the fund sold the shares at a profit, with Bang reportedly receiving 30 percent of the capital gains under pre-arranged shareholder agreements.
Bang has denied any deception, arguing that the investment terms—including profit-sharing agreements—were suggested by the investors themselves and that he acted within the boundaries of their requests.
Risk Concerns Before HYBE’s IPO
In 2017, when HYBE was still Big Hit Entertainment, its value rested almost entirely on the success of BTS. The group had already achieved international acclaim with songs such as I NEED U, DNA, and Spring Day, but early investors remained cautious, particularly due to South Korea’s compulsory military service requirements for BTS members.
At the time, HYBE’s leadership discussed securing long-term foreign investment instead of an IPO. Deals with large global investors, such as SoftBank-style backers, would have eased financial pressure while allowing management to focus on growth.
Early Investors Exit Amid Uncertainty
Despite BTS’s booming popularity, concerns over sustainability and military service prompted early investors to sell their shares. Bang was tasked with finding buyers. HYBE contacted U.S. and Japanese funds, but negotiations faltered. Eventually, Stick Investment and Easton Equity Partners stepped in. Stick acquired 12.4 percent of HYBE’s pre-IPO shares in October 2018, followed by Easton’s purchase of 2.7 percent in mid-2019. By late 2019, New Main Equity joined with an 8.7 percent stake.
To protect investors, Bang reportedly agreed to clauses ensuring buybacks if an IPO failed while retaining 30 percent of future profits if it succeeded. Investors ultimately reaped enormous gains—some achieving nearly 20 times their initial investments.
IPO and BTS’s Explosive Success
Contrary to investor concerns, BTS continued to soar globally with milestones like Boy With Luv in 2019 and Dynamite in 2020. BTS became the first Korean act to headline a solo concert at Wembley Stadium and dominated Billboard charts.
With private investments drying up, HYBE pivoted to an IPO, selecting underwriters in January 2020 and going public in October of the same year. The IPO was a triumph, with share prices doubling on launch and peaking at nearly 421,500 KRW ($325) in 2021. HYBE subsequently rebranded in 2021, positioning itself as a global entertainment powerhouse.
Some early investors who sold before the IPO expressed regret, as their final deals closed just two months before HYBE confirmed its underwriter selection. However, insiders argue that no one could have foreseen BTS’s astronomical trajectory, and early exits were simply risk-management decisions.
Sources: allkpop
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