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Retail investors rush to submit deposits for Big Hit’s public subscription

Oct. 5, 2020 - 17:57 By Jie Ye-eun
Potential investors visit a brokerage office in Seoul Monday to apply for the public subscription of Big Hit Entertainment on the first day of the agency’s initial public offering on the nation’s main bourse Kospi. (Korea Investment & Securities)

Retail investors had submitted some 8.62 trillion won ($7.43 billion) in deposits during the first day of the two-day preorder session for stocks of Big Hit Entertainment, the agency behind K-pop sensation BTS, reflecting explosive interest from retail investors, according to investment banking sources on Monday. It was more than the figure seen on the first day of public subscription of SK Biopharmaceuticals, that marked around 5.9 trillion won, but far less than Kakao Games with 16.4 trillion won, they said.

While NH Investment & Securities and Korea Investment & Securities received subscriptions as the lead underwriters of the IPO, competition at the brokerages marked 69.77 to 1 and 114.82 to 1, respectively. Competition at other members of the underwriter group Mirae Asset Daewoo and Kiwoom Securities also came in at 87.99 to 1 and 66.23 to 1. Overall, the shares were oversubscribed 89.6 times on the day.

With around 1.42 million shares, or 20 percent of the company’s total offering, being sold to retail investors under the planned IPO, some market watchers previously forecast that Big Hit might break Kakao Games’ record. Last month, retail investors chipped in some 58.55 trillion won in subscription deposits for the game publisher’s stock. That competition also marked 1,524.85 to 1.

Ahead of Big Hit’s IPO, deposits in cash management accounts here surpassed 64 trillion won for the first time in the nation’s history, data showed.

According to data from Korea Financial Investment Association, the net asset value of cash management accounts offered by local brokerage firms reached nearly 64.94 trillion won as of Tuesday, or one trading session ahead of Big Hit’s public subscription.

One trading session prior to SK Biopharmaceuticals and Kakao Games’ retail tranches, the net asset value of CMAs also surged, marking 60.96 trillion won and 57.52 trillion won, respectively, but the figures were far lower than during the agency’s IPO, the data showed.

While both market experts and investors wait to see whether Big Hit will log record-breaking IPO subscription numbers, its two-day tranche will wrap up Tuesday at 4 p.m.

Amid heated competition, some investors said they even borrowed money from local banks to make enough deposits for the subscription to win a single 135,000 won share.

A 35-year-old surnamed Shin borrowed about 40 million won from a local bank to make a deposit of some 1.5 trillion won for Big Hit’s shares. The bank loan’s over two percent annual interest rate was not an obstacle for him.

“I have been trading stocks for nearly 6 years and this is not even the first time for me to make a deposit for a public subscription. But borrowing money from a bank just for the event is my first time experience,” Shin said.

“Before making the decision, I’ve heard news saying that if the preorder competition reaches 1,000-1, an individual has to park 67.5 million won to win over a share. I hope I can get at least one share, It’s my earnest desire for now.”

Through the initial public offering, Big Hit hopes to raise about 962.6 billion won in fresh funds. While the K-pop agency’s market capitalization is anticipated to reach up to 4.8 trillion won under the plan, the firm is slated to to make its market debut on the nation’s main bourse Kospi market on Oct. 15.

By Jie Ye-eun (