K-Pop Stocks Sink as Member of EXO Leaves for New Agency

Shares of K-pop companies sank this week following news that a member of K-pop ground EXO is leaving SM Entertainment for a different agency. According to reports, D.O. will leave SM Entertainment for a new agency being established by his longtime manager. D.O.’s contract expires in early November, SM Entertainment said in a statement, and the artist “will continue with his EXO activities with SM” but pursue acting and other activities through the new agency. 

SM Entertainment shares fell 9% to 113,400 won ($83.93). Shares of YG Entertainment, home of girl group BLACKPINK, dropped 9.3% to 53,700 won ($39.74). Shares of JYP Entertainment, home of Stray Kids and Twice, plummeted 11.1% to 100,900 won ($74.67). HYBE, home to BTS and Tomorrow X Together, fell 8.2% to 224,500 won ($166.15). Shares of Kakao Corp. dropped 9.6% to 39,050 won ($28.90). Kakao and its subsidiary Kakao Entertainment own 40% of SM Entertainment’s common stock. Earlier this year, Kakao Entertainment formed a North American joint venture with SM Entertainment. 

With all K-pop stocks moving in synch, investors appear to be concerned that the established agencies could be threatened by upstarts. Because Korean companies have far smaller rosters than publicly traded Western music companies such as Universal Music Group, Warner Music Group and Believe, any one departure can have an outsized impact. When BTS announced it planned to go on hiatus, HYBE’s share price dropped nearly 25% the following day.

Separately, the chief investment officer of Kakao, Bae Jae-hyun, was charged with manipulating SM Entertainment’s stock price in connection with Kakao’s bidding war against HYBE over SM Entertainment in the first quarter of the year. According to Bloomberg, the executive was arrested Thursday for buying 240 billion won ($178 million) worth of SM Entertainment shares in an effort to disrupt HYBE’s tender offer. 

Despite the week’s heavy losses, K-pop stocks are among the best performing music stocks in 2023. Through Friday, HYBE, SM Entertainment, YG Entertainment and JYP Entertainment have gained an average of 37.1% year to date. JYP Entertainment leads the four companies with a year-to-date improvement of 48.8%.

The 21-stock Billboard Global Music Index fell 3.1% to 1,313.44, lowering its year-to-date gain to 12.5%. It was the biggest one-week drop for the index since July and just the seventh time this year the index dropped by more than 3% in a week. Losses were widespread and only four of the 21 stocks posted gains. 

Stocks generally had a miserable week. In the United States, the Nasdaq composite index fell 3.2% and the S&P 500 declined 2.4%. In the United Kingdom, the FTSE 100 dropped 2.6%. South Korea’s KOSPI composite index sank 3.3%. As the first wave of companies released third-quarter earnings this week, one of the standouts was Netflix. The streaming video giant gained 16.1% on Thursday after announcing it added 9 million subscribers in the quarter and will raise prices in the U.S., U.K. and France.  

Anghami was the index’s greatest gainer for the second straight week after increasing 16.6% to $0.96. Last week, shares of the Abu Dhabi-based music streamer jumped 18% after the company received a written notification from the Nasdaq Stock Market on Oct. 12 regarding its closing share price falling below $1.00 for the previous 30 days. On Tuesday, Anghami issued a press release to reveal the Nasdaq Stock Market issued a written notification notifying the company it is not in compliance with the exchange’s requirement that listed companies maintain a minimum market value of $15 million. Anghami fell below the $15 million threshold from Aug. 29 to Oct. 10. Anghami has until April 8, 2024, to regain compliance. 

Hipgnosis Songs Fund gained 4.9% to 0.775 GBP ($0.94) this week despite dropping 9.3% on Monday following news the company canceled a planned dividend payment. As the week progressed, the London Stock Exchange-listed company’s stock price steadily increased and was helped by the board of director’s announcement on Thursday of a strategic review to help calm investors’ nerves. After Monday’s decline, the share price rose 15.6% through Friday (Oct. 20) to reach its highest closing price since Oct. 3. At the company’s annual meeting on Oct. 26, shareholders will vote to approve a $440 million catalog sale intended to reduce the share price’s discount to Hipgnosis Songs Fund’s net asset value. Shareholders will also vote on a continuation resolution.