BLACKPINK’s Agency YG Entertainment’s stocks continue to fall; Here’s why

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YG Entertainment is currently grappling with a period of uncertainty, leading to growing concerns among its investors. The primary source of this unease revolves around the contract renewals of the globally renowned girl group BLACKPINK and the cloud of uncertainty shrouding the group’s future endeavors. The extended ambiguity has given rise to a continuous dip in YG Entertainment’s stock value, prompting queries about the firm’s stability within the fiercely competitive K-pop industry.

Prolonged Ambiguity and Investor Discontent

Despite widespread speculations and concerns about BLACKPINK’s contract renewals, particularly the potential establishment of independent agencies for members Jennie and Jisoo, YG Entertainment has consistently responded with the statement, “Nothing has been confirmed yet.” This extended period of ambiguity, customary for publicly traded companies, has left investors dissatisfied.

Stock Price Decline and Investor Actions

As of September 25, 2023, YG Entertainment’s stock price experienced a fourth consecutive trading day decline, closing at 65,500 won. During this period, the stock price plummeted by 18.43%, largely attributed to unsettling news regarding BLACKPINK’s contract renewals and plans for individual agencies for Jennie and Jisoo. The agency’s passive stance in addressing these matters has contributed to investor dissatisfaction.

Foreign investors played a significant role in the sell-off of shares, leading to a decline in foreign ownership from the 18% range to the 15% range. Foreign investors sold a net total of 39.2 billion won in shares during this period, while pension funds, including the national pension, also divested a net amount of 21.5 billion won in shares. In contrast, individual investors viewed this period of uncertainty as an opportunity and purchased 20 billion won worth of stock.

BLACKPINK’s Significance and Shareholder Value

BLACKPINK represents a critical asset and intellectual property for YG Entertainment, and the sensitivity of ongoing contract negotiations is understood. However, the lack of a substantial response to leaked information and the resulting instability in stock prices indicate a significant security lapse. Management’s repeated phrase, “nothing has been decided,” amid a nearly 20% drop in stock prices, raises concerns about their attitude toward shareholder value.

Industry experts note a temporary re-evaluation of stock prices due to perceived improvements in entertainment management structures. However, YG’s handling of the situation with BLACKPINK suggests the persistence of the old system. The ongoing contract-renewal saga could potentially have negative repercussions on the broader K-entertainment market’s stock prices.

BLACKPINK’s Contract Renewal Status

The contract renewal of BLACKPINK has garnered significant attention due to its profound implications for both the group and YG Entertainment. Recent reports suggested that Rosé would stay with YG Entertainment, while Lisa, Jisoo, and Jennie might join different agencies. These reports, although unconfirmed by the company, indicated that the members would participate in group activities for six months while pursuing solo careers. These rumors significantly influenced the agency’s stock price, adding to the complexity of the ongoing situation.