Bang Si-hyuk

Photo Credit: Bang Si-hyuk for Hybe

Hybe chief Bang Si-hyuk faces scrutiny over a reported 400 billion won earned from IPO side deals with private equity firms.

Hybe’s chairman Bang Si-hyuk is under fire for a reported 400 billion won earned from a “secret agreement” with private equity funds (PEFs) during the company’s 2020 initial public offering (IPO).

Bang signed shareholder agreements with STIC Investments, which acquired 3.46 million shares of Hybe in 2018. He also signed agreements with Eastone Equity Partners and Neumain Equity before Hybe’s listing, which included a clause to share 30% of the sale profits if the IPO was successful — but this detail was not disclosed during the listing process.

“Legal reviews concluded that it was a private agreement between shareholders and did not need to be disclosed,” said a representative from the securities firm responsible for the listing. “However, the possibility of PEF share sales was mentioned in the securities report.” They added, “The underwriters and legal advisors determined it was a ‘specific shareholder agreement that does not harm general shareholders,’ so it was not disclosed.”

The private equity funds argue their share sales did not cause a sharp drop in stock price. On October 19, 2020, Hybe’s first day of trading, a total of 11.17 million shares were traded. STIC’s sales accounted for only 1.7% of the total. But the stock price surged by 150% on the first day compared to the public offering price of 135,000 won. Within a week, the stock price fell 60%.

“When Bang and the PEFs signed the agreement in 2018, BTS was expected to complete their military service before the IPO, making it a long-term investment of 5-6 years, and the PEFs requested a put option as a countermeasure,” said an investment banker industry insider. “Bang decided to take the put option with his personal shares to avoid burdening the company and agreed to share some of the excess profits.”

The insider also noted, “Multiple law firms were consulted during the preliminary review application and the securities report, and it was legally determined that there were no procedural issues, so it was not included in the report.”

But Bang remains under scrutiny, with potential future developments expected as regulatory bodies and stakeholders continue to assess the implications of the undisclosed agreements. Predominantly, the controversy highlights the need for greater transparency and considerations in financial transactions, especially with high-profile IPOs with influential companies.

Hybe shares also recently took a hit when girl group NewJeans announced plans to leave Hybe’s Ador, following the departure of former Ador head Min Hee-jin.