As one of the top three entertainment companies in Korea, YG Entertainment has passed screening to go public on the KOSDAQ (Korea Securities Dealers Automated Quotations), a Korean stock market exchange equivalent of America’s NASDAQ. YG will be the 2nd 3rd entertainment company to qualify to be listed on the stock market, following SM Entertainment and MNET.
YG Entertainment passed the Stock Exchange Commission’s screening to go public on the KOSDAQ. The stock price is anticipated to be set around 24,600~28,800 WON (around $22 – $26 USD with a face value of 500 WON). Around 35 billion won (around $33 million USD) will be up for trade on the initial public offering.
YG Entertainment passed the Stock Exchange Commission’s screening to go public on the KOSDAQ. The stock price is anticipated to be set around 24,600~28,800 WON (around $22 – $26 USD with a face value of 500 WON). Around 35 billion won (around $33 million USD) will be up for trade on the initial public offering.
What is KOSDAQ?
KOSDAQ (Korean Securities Dealers Automated Quotations, Korean: 코스닥) is a trading board of the Korea Exchange (KRX) in South Korea, similar to NASDAQ. A trading board/stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities.* A helpful, though not direct analogy, the Korean Stock Exchange (similar to the NY Stock Exchange) is like Wal-mart or Tesco, stable, huge, relatively reliable. KOSDAQ and NASDAQ are more like Costco and/or Amazon.com; higher end products, fully-electronic, though less volume, considered a bit classier.
Originally YGE was turned down for admittance onto KOSDAQ. According to market representatives, “the Korean Exchange is especially conservative when it comes to entertainment companies, as there are many more variables to take into account. It seems that stricter standards were used against the company.” The volatility of the entertainment industry makes investors nervous and could destabilize the stock exchange if there were too many added.
Originally YGE was turned down for admittance onto KOSDAQ. According to market representatives, “the Korean Exchange is especially conservative when it comes to entertainment companies, as there are many more variables to take into account. It seems that stricter standards were used against the company.” The volatility of the entertainment industry makes investors nervous and could destabilize the stock exchange if there were too many added.
The amazing success of YG artists of the first half of 2011 as well as the acquiring of more diverse upcoming talents seems to have been enough to convince stodgy KOSDAQ executives to take a chance on YGE. With 2NE1 and Big Bang sweeping the charts and topping album sales, along with the total views of all YG related videos on Youtube hitting over 400 million (as of May 6th), YG Entertainment’s explosive sensation overseas was a key factor in their success.
Having top idols groups such as Big Bang and 2NE1, along with, Se7en, Psy, Gummy, and many other star musicians, YG Entertainment is a blue chip company as their sales in 2010 is estimated to be around 44.8 billion won (around $44 million USD), with 10 billion won (around $10 million USD) being net profit.
YG Entertainment’s future seems smooth, as well. Starting this year, Big Bang and 2NE1 will be expanding from the Korean scene to Japan and the U.S., leading the Hallyu wave. YG will also be breaking their operating system of producing only few elite trainees and expand their horizon as they have signed contracts with Kang Seung Yoon from “Superstar K2″.
YG Entertainment also has a good history of never having any conflict regarding contract disputes with their celebrities. Top celebrities Big Bang and Se7en have extended their contract for an additional 5 years without raising any issues. This leads back to founder Yang Hyun-Seok’s business philosophy of putting the future and priority on the artists’ before the company.
YG Entertainment also has a good history of never having any conflict regarding contract disputes with their celebrities. Top celebrities Big Bang and Se7en have extended their contract for an additional 5 years without raising any issues. This leads back to founder Yang Hyun-Seok’s business philosophy of putting the future and priority on the artists’ before the company.
In an interview with OSEN, founder Yang Hyun-Seok explained, “I’ve had countless offers to sell shares of my company through a backdoor listing, but I pushed them all away. I have no intention whatsoever of making profit through the stock market. My reason to have YG Entertainment listed publicly is because I accepted the management’s advice to make YG a transparent and global company“.
Another plus is that YG has always lead in philanthropy and good works. YG was the first Korean entertainment company to donate 500 million won (around $500,000) to Japan’s earthquake cause. YG entertainment has caught attention because they donated a large sum of money to Japan despite the fact that their artists’ promotion in Japan have been delayed due to the earthquake.
Another plus is that YG has always lead in philanthropy and good works. YG was the first Korean entertainment company to donate 500 million won (around $500,000) to Japan’s earthquake cause. YG entertainment has caught attention because they donated a large sum of money to Japan despite the fact that their artists’ promotion in Japan have been delayed due to the earthquake.
What does all this mean for 2NE1? 
In the short term, MORE MONEY, but not in the way you are probably thinking.
When a private company joins a stock exchange or "goes public," it makes a public offering for investors to purchase shares of the company's stock. A shareholder is a part owner of the company and has the right to PARTICIPATE in making certain business decisions for the company.
Now that YGE has been accepted into KOSDAQ they will make an initial public offering which will generate a large amount of investment dollars that YGE can use for overseas promotions. Overseas promotions are very costly. Especially in the beginning. YGE will have to fork over a TON of money to properly promote 2NE1's first US album, it will be hard to recoup those dollars initially. Moreover, the overall cost of doing business in USA/Canada is much higher than in Korea. YG has much fewer "connections" and deal-making abilities overseas.
The extra capital/money from the IPO will go a long way in monopolizing on early buzz for the girls and getting them as much publicity and marketing as possible. It can also ensure to Western investors that YGE has a long-term commitment to 2NE1's US aspiration and its not a fly-in-pan type strategy. If YGE is putting up hundreds of thousands of its own dollars for 2NE1, then Western investors will see YGE is serious about promoting 2NE1 to Western audiences.
Morever, more investment dollars, means that YGE won't be as dependent on 2NE1's Korean income and can allow them to focus more singularly on overseas activities. Unlike now, where YGE needs the income generated by Big Bang and 2NE1 to fund the company, they will have additional large amounts of money coming into the company. This will give YGE more freedom to really pursue new ventures and music markets.
One of several drawbacks to entering KOSDAQ is that YG will lose some of his control of the company. YG micromanages many of the details of the company with absolute control. However, with these new stockholders he may have to make business decisions to please the investors that he did not have to deal with before. This is a concern, particularly since it could effect the company satisfaction levels of his artists which is one of the cornerstones of YGE.
However, recall that YGE has several major investors already. Having stockholders won't be that huge of a change on day-to-day operations and will give some transparency to the company. This would also be a great move if YG plans to become his own distributor rather than using MNET/CJ for distributing his albums locally and overseas.
Congratulations to YGE for joining KOSDAQ, hopefully this will bring nothing but good things to YGE and 2NE1^^
One of several drawbacks to entering KOSDAQ is that YG will lose some of his control of the company. YG micromanages many of the details of the company with absolute control. However, with these new stockholders he may have to make business decisions to please the investors that he did not have to deal with before. This is a concern, particularly since it could effect the company satisfaction levels of his artists which is one of the cornerstones of YGE.
However, recall that YGE has several major investors already. Having stockholders won't be that huge of a change on day-to-day operations and will give some transparency to the company. This would also be a great move if YG plans to become his own distributor rather than using MNET/CJ for distributing his albums locally and overseas.
Congratulations to YGE for joining KOSDAQ, hopefully this will bring nothing but good things to YGE and 2NE1^^
Credit: YgLadies
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