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November 19, 2019

Investors face setback of W200b on YG scandal

PUBLISHED : June 19, 2019 - 15:00

UPDATED : June 19, 2019 - 15:20

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Investors in YG Entertainment including the National Pension Service have suffered losses of around 200 billion won ($169.2 million) over the past six months, according to Korea Exchange data.

Broken down, the NPS lost around 20 billion won, while some 20,000 minority shareholders lost about 182 billion won

On June 18, the scandal-ridden entertainment agency’s share price closed at a low of 28,300 won. Since peaking at 48,950 won on Dec. 26 last year, prices have been plunging, wiping out 65 billion won of the Kosdaq-listed company’s stock value.

On June 14, YG founder Yang Hyun-suk and his brother Yang Min-suk, who served as CEO, stepped down following allegations that yet another YG artist used drugs. 

Related: 
YG Entertainment shares plunge amid tax probe
How ‘Burning Sun scandal’ pulled down YG stock prices


Some saw this as a move that could restore investor confidence, but others argued that it was a loss of corporate value.

“With the resignation of CEO Yang, YG can now distance itself from various suspicions and controversies related to him,” said Yoo Sung-man, an analyst at Hyundai Motor Securities.

Another analyst who wished to remain anonymous said that Yang’s absence poses a huge challenge to the company because it has now lost one of the biggest intangible assets-- with a huge network.

The value of stocks held by the YG management has also eroded. Yang, who holds 31.5 billion shares, saw his fortune decline from 154 billion won around six months ago to 89.2 billion won as June 18. The stock value held by the third-largest shareholder Naver decreased from 81.3 billion won six months ago to 47 billion won.

The debacle surrounding YG Entertainment whose notable musicians include Big Bang and Blackpink began in January when a scandal involving Big Bang member Lee Seung-hyun -- better known as Seungri -- erupted.

Executives of local night club Burning Sun, including Seungri who was an inside board director, are accused of conducting drug-riddled parties and condoning sexual assaults on customers. 


B.I, former leader of K-pop boyband iKON, faces an allegation of drug use.
(YG Entertainment)



On March 20, the company’s stocks were hit again when the National Tax Service raided it over alleged tax evasion. In May, analysts seemed to dust off those allegations.

Hazell Lee, an analyst with NH Securities wrote that the company’s fundamentals remain solid at its core business. And Lee Ki-hoon, a researcher at Hana Financial Investment, also said despite the scandal prospects for core business is not bad. 

However, that was before the eruption of yet another scandal. Last week, Kim Han-bin, also known as B.I. the leader of popular K-pop boy band iKON, left YG Entertainment following allegations that he used and tried to purchase marijuana and LSD.

By Park Ga-young (gypark@heraldcorp.com)

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