Thoughts on the BigHit IPO and the company's current valuation?
BigHit Entertainment, a Korean entertainment company best known for managing BTS, recently went public. Share prices initially rallied on the first day, before dipping due to investors realising that the company has a heavy reliance on one band (up to 97.4% of revenue came from BTS alone in 2018). BigHit has since acquired smaller entertainment companies, making their revenue split less skewed towards BTS. However, I'm curious to hear your thoughts, since it's a pretty hot topic in Korea/Japan
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South Korean groups usually have the spotlight for about 5 to 7 years, perhaps even lesser, or till members are about 30 years old. With the uncertainty of the compulsory National Service, the company's profit could be hit tremendously anytime.
BTS could be considered an oddball (being that successful) and it is not possible to recreate another band with similar popularity using the same efforts especially in an arts & media industry where trends are changing rapidly.
From an investor point of view, the concern of uncertainty is not assuaged by diversifying into other bands. In addition, the members' value is continuously depreciating with age. Assuming that successful band members can avoid National Service, the industry will still be very cyclical due to changing taste and preference of consumers. There will be no knowing how the company will perform in two or more decades from now and therefore not a good company/industry for a long term investment.