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Management collective The Circuit Group has launched Circuit Capital, a platform to acquire and scale music assets and cultural IP. Circuit Capital is being backed by Create Music Group, which is providing Circuit Capital with access to more than $500 million with which to execute its mission.
The fund will invest in catalogs, record labels, publishers and other music-driven ventures with a mission to build long-term sustainable value. Circuit Capital will provide capital to back upcoming projects by artists being managed by The Circuit Group, an initiative that involves back catalog investments and futures funding deals and providing artists with the resources to invest in their own music and careers.
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The Circuit Group launched in October of 2023, bringing together management companies Ayita and Seven20, whose combined rosters include electronic artists Fisher, Chris Lake, deadmau5, Cloonee, Aluna, Ninajirachi and many more. The company launched with the mission to acquire 50% ownership in artists’ IP portfolios and partner with them to build opportunities across verticals, while also offering traditional artist management.
The business was launched by dance industry executive and deadmau5’s longtime manager Dean Wilson and his wife/business partner Jessica Wilson, along with Brett Fischer, David Gray and Harvey Tadman. The Circuit Group team expanded in the summer of 2024 upon announcing seven new hires.
Now, Circuit Capital’s goal is to create a community atmosphere and serve as a home for artists, entrepreneurs and rights-holders who will work with a group of longtime professionals with a deep understanding of and footing in the electronic music industry.
“Our mission is to put culture at the center of everything we do,” The Circuit Group co-founder Harvey Tadman says in a statement. “Too often, the people buying into music don’t understand the world it comes from. We’ve built our careers inside this culture. Circuit Capital is our way of ensuring that when artists decide to sell or scale, they can do it with people who speak the same language and share the same values. We couldn’t imagine a better partner than Create Music Group.”
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Earlier this year, Create Music Group announced that it acquired the deadmau5 catalog, along with the catalog of the electronic producer’s longstanding label, mau5trap.
“We’re excited to announce this unique partnership with Circuit,” says Create Music Group CFO William Smith. “We have been impressed by their relentless focus as managers on partnering with their clients to build assets with substantial, enduring value, as exemplified by the recent deadmau5 transaction. Moving forward, we’re pleased to be backing Circuit’s strategy of investing into the same music catalogs and businesses that they’re helping to grow – in other words, ‘putting their money where their mouths are’ – by providing them with this fund.”
“Our partnership with The Circuit Group represents Create’s continued mission in building the leading technology, infrastructure, and capital platform for artists and entrepreneurs,” says Create Music Group co-founder and CEO Jonathan Strauss. “Circuit has evolved into one of the most respected and trusted management teams in the dance space, with a deep understanding of what artists need to grow, innovate, and create long-term value. Together with Circuit, we’re aligning resources, expertise, and vision to empower music entrepreneurs to build enduring, global businesses.”
Trending on Billboard SiriusXM Holdings saw quarterly revenue slip 1% year-over-year to $2.16 billion, though it reversed a loss from a year ago to generate $297 million in positive net income, the company reported Thursday (Oct. 30). That turnaround — Sirius reported a net loss of $2.96 billion in the third quarter of 2024, stemming […]
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Mike Morris is one of music’s biggest new investors — and he’s placing his bets on the indies. The managing director of Chicago-based private equity firm Flexpoint Ford has overseen what Billboard estimates is more than $375 million of investments in some of music’s most influential independent companies since 2023. After initially backing the front-line music business at Nettwerk, the label that broke Sarah McLachlan and Barenaked Ladies, that same year the firm announced a “significant investment and partnership” in Goldstate Music, the catalog investment firm founded by former BMG president/COO and J Records co-founder Charles Goldstuck. Last year, Flexpoint led a $34 million equity financing round for Duetti, a music investment company that focuses on indie rights, and led a $165 million investment in Create Music, a music distribution, publishing and data analytics company.
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Morris, who has previously held positions at Northleaf Capital Partners, H.I.G. Capital and Moelis & Co., says that Flexpoint’s focus on high-return middle-market companies serving independent artists has resulted in “repeated success.”
“We’ve really leaned into the independent sector of the music industry — it is just growing much faster than the traditional majors ecosystem,” Morris says. “This part of the market is so large and fragmented and there is so much growth…and tremendous opportunity for innovation.”
What do you think of the maneuvers by the majors, like Universal Music Group’s proposed acquisition of Downtown Music, that target the growth of the indie segment?
They are evidence enough of the fact they have been losing share to the independent ecosystem. They wouldn’t be buying these companies if it weren’t the case. We think our platform companies — whether one or more of them ends up in a major at some point, we’ll see — can outcompete because they don’t have the legacy infrastructure that some of the majors do. And they can complement the majors in serving this vast, fragmented and growing part of the market.
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What are the new modes of monetization you have talked about that excite you?
I’m talking about everything outside of the traditional streaming platforms: Meta, TikTok, YouTube, which is where Create started out. YouTube rights management, if you know how to do it correctly, is a very attractive and important area. Synch placement in video games, fitness apps — all of these tangential revenue streams. Not everyone knows how to monetize those streams, and it is core to the strategy for all of our portfolio companies.
What makes Create special?
Create has only been around for about 12 years. They are a digitally native service and capital provider to the independent sector. It doesn’t have the legacy baggage around infrastructure that some of the services and labels have. Create started out as a pure-play rights management business and then went through a natural evolution, tacking on distribution, accounting systems, publishing — all built on this digitally native background. Their numbers aren’t public, but if they were, they’d speak for themselves.
Duetti was the first, but likely not the last, company to acquire the masters and publishing rights of indie artists bubbling under the mainstream radar. How are they prepped for competition?
This is something [Duetti CEO Lior Tibon] has thought a lot about. They do have a first-mover advantage. But the reason no one else is doing it is because it’s really hard to do. Buying these small catalogs involves a high degree of sophistication, data, AI [artificial intelligence] and operational discipline to acquire thousands of catalogs and thousands of individual tracks. Most music companies and other funds in the space have not set themselves up to do that in a way that’s scalable. More competition is something we’ve planned for at the board level and among the shareholder group and management team. We feel like it’s going to be very hard to replicate the strategy at this kind of scale.
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Goldstate Music is more traditional compared with the other companies in your portfolio. What do you like about their method of investing in music intellectual property [IP], and would Flexpoint directly acquire catalogs itself?
Charles Goldstuck is a best-in-class operator who’s proven over decades in and around the music business that he knows how to start businesses, take on institutional capital like ours, identify attractive parts of a market and use capital to create attractive returns for his investors. [He has a] sophisticated, important piece of the strategy: working on them actively to get the most juice out of those assets. Things like changing and optimizing distribution contracts, synch placements, creating remixes and derivative works, getting [name, image and likeness] rights and doing merch and working actively with those artists.
Songs by Xania Monet, an AI artist that Hallwood Media signed to a multimillion-dollar agreement, are climbing the Billboard charts. How could the commercial success of AI music affect the value of catalogs?
It’s fascinating to see AI-powered artists now being signed by labels. Yes, they’ll compete for listening time and could take some share. But in practice, I think it makes high-quality, authentic catalogs and artists even more valuable. So I don’t see AI destroying catalog value. Instead, I see it widening the gap: disposable, machine-made music on one side and enduring, human-driven catalogs on the other. The latter will continue to command attention, cultural relevance and investor confidence.
What are you currently working on?
The most interesting things I’m seeing right now [include] international opportunities in Asia, the Middle East [and Latin America], both on the catalog side and with music service providers. Music-adjacent service providers and IP businesses in music-adjacent spaces like film, TV and video games are heavy users of music. We’re looking at a business in Korea right now that is in some ways like Create. It has evolved organically in the Korean music ecosystem to provide services focused on artists’ and independent labels’ needs.
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How long do you plan to be involved with portfolio companies?
We’re not quick-flip investors. We’re not in the quick-hits business. We’re about partnering with entrepreneurs and founders to build enduring businesses that can compound value over a long period of time. We think exits take care of themselves, as long as we’re helping build enduring businesses. Sometimes it takes three years, sometimes five and sometimes 10.
Many companies, including Duetti and Create, are exploring raising funds through issuing asset-backed securities. Why is this a good strategy, and what are the potential drawbacks?
To me, this is just music catching up to what other asset classes have been doing for decades. When you have reasonably predictable cash flow streams, it is a more efficient form of financing — no different from bank financing. But it’s in a more regimented form and checks the boxes the buyers of these types of bonds want. It’s a clear positive for the industry. The only real drawback is it is a significantly bigger undertaking in terms of the documentation and the ratings process than going to a bank and getting a loan. So it does require time, attention and effort from management teams and us.
It’s hard to predict the staying power of songs. Do you have any concerns about very young songs being used to collateralize this type of bond or companies with high loan-to-debt rates adding to their debt this way?
I hear all the same things. The performance of these bonds — both public and the private — has been 100%: no defaults, no issues. But it’s a relatively young asset class in the securitization market. So you might see some folks use the leverage very aggressively, which would be unwise. But I think the buyers of these bonds are sophisticated enough to know what they’re getting into and to analyze these cash flows and to structure them in a way that makes sense. These investors have a lot of experience now in both music and other asset classes where the modeling isn’t very different. It’s all a function of risk/reward tolerance and pricing appropriately.
Goldman Sachs lowered its global growth expectations for the music industry for the next five years, as well as its forecast for global recorded music revenues this year, in a report published Tuesday (June 3).
The Wall Street investment bank’s Music in the Air report, which has become a closely-watched guide for music industry executives and investors, said it expects the global music industry to generate $31.4 billion in net revenues in 2025, a $2.5 billion decline from its 2024 projection of $33.9 billion.
That reflects growth of 6.8% on average from 2025 to 2030, down from the 7.6% compound annual growth rate (CAGR) analysts had previously forecast for that period last year. The primary factors driving that downward revision, Goldman says, are the slowing growth of last year’s recorded music revenues and lower ad-funded streaming growth, both of which contributed to expectations of 7.9% streaming growth on average from 2024-2030, down from the 9.8% previously forecast.
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“2024 was the first year since we began forecasting music industry trends where global music revenues fell short of our expectations,” the authors of the closely watched report wrote. “This was also the first year since we started forecasting music industry revenue where the recorded music market came well below our expectations.”
Goldman also issued new estimates for future growth, projecting that the music industry will grow at a compound annual growth rate of 4.8% for the years 2031 to 2035.
These slower growth forecasts echo findings of earlier reports this year, such as the IFPI’s March findings that global recorded music growth for 2024 was half of what it was in 2023, and the RIAA’s similar report that found that U.S. streaming revenue growth last year slowed to 3% from 7.7% in 2023.
Nonetheless, Goldman analysts said they expect the value of music rights and companies to remain “resilient” amid an uncertain macroeconomic backdrop, and that more frequent streaming subscription price increases and individualized service plans will provide support.
In 2025, Goldman says it expects global music industry revenue growth of 7.7%, down from its previous forecast of 8.3%, with growth in the live music sector and a slight improvement in recorded music revenue growth serving as the main drivers.
Goldman’s revision of its streaming growth outlook within recorded music revenues was due to significantly lower ad-funded streaming, researchers said. Ad-funded streaming growth is expected to slow to 5.7%, compared to its 2024 forecast of 11.3%.
Researchers said these “meaningful changes to our streaming assumptions” stem from a structural shift of more consumers preferring shortform as opposed to longform videos, less upside gained from emerging platforms and the impact of near-term uncertainty.
Those factors also caused Goldman to expect slightly lower subscriber and average revenue per user growth among streaming platforms.
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Citrin Cooperman estimates a record-setting number of music catalogs with a combined value of around $20 billion were floated to investors last year. While economic and political uncertainty so far in 2025 has sent stocks and global trade on a roller coaster, the head of Citrin Cooperman’s music and entertainment valuation practice Barry Massarsky says his team has never been busier.
Massarsky and partner Jake DeVries reviewed over 550 music catalogs with a combined asset value of $10.7 billion last year, a figure that Massarsky says “demonstrates very loudly how much volume is in the marketplace.”
“Yesterday, I was dealing with a seminal holiday music catalog, a well-known classical music artist, this group from Nigeria, and film and television,” Massarsky told Billboard during a conversation in mid-April at Citrin Cooperman’s offices in Rockefeller Center.
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Over his two-plus decades in practice, Massarsky’s best known clients have been Primary Wave, Round Hill Music, Hipgnosis, Reservoir and nearly every major music company. Since joining Citrin in 2021, their business expanded to offer entertainment tax advice, audit inspection, transaction strategy, and recently, to include a valuation team focused Hollywood actors’ and directors’ participation rights.
Massarsky and DeVries shared their observations about the current market value being placed on pop and hip-hop music, the average size of a catalog they valued in 2024—it’s smaller than you might think—and the ongoing popularity of music from the 1980s.
Here are some highlights from our conversation:
Hip-hop and pop music catalogs 10 years old and older fetch the highest valuation multiples, a trend that’s held steady since 2022.
Pop music and hip-hop catalogs of songs released more than a decade ago received valuation multiples—a measure of future growth—of 17.6 and 17.4 respectively on average from 2022-2024. Latin catalogs had an average multiple of 17.1, country catalogs had 16.8 average multiple and rock music averaged a 16.7 multiple.
Some of the biggest hip-hop catalog deals of recent years include Primary Wave’s $200 million acquisition of Notorious B.I.G.’s works, Shamrock Holdings’ purchase of Dr. Dre’s catalog along with other rights for around $200 million and Opus Music Group’s acquisition of Juice WRLD’s catalog for $115 million, according to Billboard estimates.
Those deals aside, the priciest catalogs have been mostly older vintage pop and rock music from artists like Queen, Michael Jackson, Bruce Springsteen, Pink Floyd and Bob Dylan.
Massarsky says hip-hop catalogs are now in-demand because “it is one of the most favored formats for continued streaming activity” and the revenue it generates from publishing royalties has risen significantly due to higher payout rates coming from streaming platforms in recent years.
DeVries says hip-hop music is also over-indexed, or consumed at a proportionately higher rate, on Apple Music, which adds to its value because Apple Music’s payout rates are high among streaming platforms since it does not offer any free plans.
“If there previously was a concern about whether Hip-hop had legs to grow and whether the music would have certain constancy of staying power,” Massarsky says, “the data suggests the answer is yes.”
While deals like Sony Music’s $1.27 billion acquisition of Queen’s catalog and naming rights get the most attention, Massarsky and DeVries say the average valuation for a catalog they worked on in 2024 was $19 million.
“[That] illustrates how much volume there is outside of what garners the most attention,” DeVries says.
Catalogs that included master recording and publishing rights received the highest multiples because often those catalogs are also near the end of certain contracts, and a new buyer could have the opportunity to assume administration or ownership of certain other rights.
Music from the 1980s performs better on streaming platforms than music from the 1970s, 1990s or 2000s.
Music released in the 1980s saw a nearly 20% compound annual growth rate (CAGR) in cash flows from U.S. streams for the years 2022 to 2024, compared to a 17.9% rate for the 1970s, 14.9% for the 1990s and 14% for music of the 2000s.
Massarsky thinks the strength of older music comes, in part, from adult listeners who started Spotify subscriptions during the pandemic.
“An older generation turned to streaming services during that period, and I think they stayed,” Massarsky says, adding the popularity of 1980s music has not resulted in lower streaming revenue for music from other decades.
“It has not crowded out newer music. It’s just added more value to the supply of music on streaming.”
Although Citrin’s team is not involved in catalog sales directly, the value they give a catalogs is usually close to the price an asset sells for. In other words, despite occasionally eye-popping sums, buyers rarely overpay.
Citrin’s valuations are often commissioned by rights holders for use by commercial banks to secure financing or other bank services. The banks test Citrin’s valuations to determine the difference between the revenue an asset actually generated and how much Citrin estimated it might generate. Massarsky says Citrin’s estimates always fall within the bank’s acceptable range of plus or minus 5%.
“For me, that implies that our forecasts are fairly accurate, and also implies, I think, that what these funds are transacting at is credible,” he says.
DeVries says that they might not know if there is a gulf between Citrin’s valuation and ultimately where the catalog transacts. But if a buyer overpays, it is likely because of “some qualitative, intangible” benefit, like making a splash for a newcomer to the market.
Buyers and sellers of catalogs are not showing signs of holding their breath.
If there hadn’t been catalogs that were re-sold in 2024—such as Blackstone buying out shareholders of Hipngosis Songs Fund Limited or Opus Group selling their catalog to Litmus—”it might be a different story this year,” DeVries says. But investor demand is robust, Citrin says.
“The resiliency of music as an asset class is why there haven’t been any significant disruptions,” DeVries says. “We had the experience of the COVID-19 pandemic, and oddly enough music thrived. Now with questions around tariffs, music is a protected vehicle from tariffs. When these large hurdles are thrown at music, it has continued to prove itself as essentially unperturbed.”
Jeremy Tucker of Raven Music Partners is content to operate in areas of the music business that attract relatively little attention. “I am certainly not going to pretend that I’m the coolest person at cocktail parties,” Tucker says, “and I’ve never signed any famous bands as a former A&R rep.”
As co-founder and managing member of the Nashville-based investment firm, Tucker isn’t focused on acquiring what he calls “trophy” catalogs — the Taylor Swifts, Bruce Springsteen and Queens of the world. Nor is he creating biopic films made for the artists in his catalog. Instead, he’s wringing out value from acquired music catalogs and trying to provide his investors a good, risk-adjusted return.
While interest in music rights from financial buyers has exploded in the last five years, Raven Music Partners launched in 2015 and has built a 15,000-song portfolio of assets including recorded music, music publishing and derivative rights such as producers’ royalties. Tucker and his team focus on the small- to medium-sized part of the market with deal sizes typically ranging from $5 million to $35 million but going up to $100 million.
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The world of music catalog investors can be broken into two camps: strategic buyers and financial buyers. Large music companies like Universal Music Group are called strategic buyers because they have a large infrastructure and creative talent to generate additional value from catalogs. These multi-faceted companies will pursue everything from movies to box sets to artist-branded jukeboxes in order to generate licensing income from their catalogs.
Raven Music Partners is a financial buyer, the kind of investor that treats music royalties as financial instruments similar to stocks, exchange-traded funds, mutual funds and debt. Financial buyers seek out catalogs with predictable cash flows and opportunities to generate a better return. Strategic buyers often pay a premium to control 100% of the rights; financial buyers are more willing to have fractional ownership of a recording or composition.
“What we’re focused on is the boring part of the business,” says Tucker, a former managing partner at Merrill Lynch who specialized in alternative asset classes.
Administration fees lack pizazz but are a good example of how a financial buyer can improve the returns on its investments. After an acquisition, Raven Music Partners will consolidate the rights under its rights management partner, Endurance Music Group, to cut out as many of the middleman fees as possible. Tucker says it’s not uncommon to see administration or distribution fees on acquired catalogs around 15% to 25%, and he’s seen catalogs with fees as high as 40%. Reducing fees isn’t the sexiest of accomplishments, but it increases the catalog’s net cash flows. “Saving 10% in collection fees can be pretty meaningful in terms of value-add,” he says.
There are also creative options for finding return on its catalog investments: re-releasing the masters in high-fidelity audio and Dolby Atmos, anniversary editions of albums or songs, and YouTube lyric videos, for example. Sometimes, says Tucker, there’s value in something as simple as a YouTube fan page or making sure all an artist’s tracks are available on the platform. “There are plenty of bands out there that might have several million repeat followers on Spotify or one of these other DSPs, but maybe they’re not that focused on all of the different media.”
Tucker says the Raven catalog has “a good amount” of rock, country, pop and Christian music, with some hip-hop and Latin. “From a genre standpoint, we are agnostic, and we think that all of these genres have value,” he says. “What’s important is that they have a fan base that cares.” The catalog includes well- known tracks by major artists, such as “Whiskey Glasses” by Morgan Wallen, “All About That Bass” by Meghan Trainor, and “Say You Won’t Let Go” by James Arthur.
There’s a lot more music for financial buyers like Raven Music Partners to acquire. Tucker puts a rough estimate of $500 billion on the total addressable market for recorded music and publishing assets. The majors probably own close to half of that number, he says, while financial buyers like Raven Music Partners probably own “less than $20 billion.” That leaves much of the market potentially for sale. And with more artists retaining ownership of their rights, Tucker believes there will continue to be investment opportunities.
“We don’t think that it’s gotten to the point where people can’t compete in this market. Some of the more iconic catalogs are, of course, going to have everyone in the space interested in owning them. But for us, because we focus on a small- to medium-sized part of the market where things are a little more fragmented, we just don’t see that much repeat competition from the same people.”
In March, Raven Music Partners formed a joint venture with Aquarian Holdings, an asset manager with nearly $22 billion of assets under management, to invest in music rights. Raven’s ability to unlock value from catalogs through “active management and creative monetization strategies” aligns with Aquarian’s belief that music can be “both culturally significant and financially compelling,” says Rudy Sahay, founder and managing partner of Aquarian Holdings.
“At Aquarian, we’re focused on backing high-quality, enduring assets — and few assets are as enduring as great music,” says Sahay. “We see real value in partnering with Raven Music Partners, whose investment strategy is rooted in both discipline and deep industry connectivity.”
Pophouse Entertainment, the Swedish catalog company behind the virtual live show ABBA Voyage, said on Monday it raised a total of 1.2 billion euros ($1.3 billion) to invest in acquiring catalogs and entertainment experiences around those music rights.
The fundraise consists of 1 billion euros raised through a private equity fund, and 200 million euros ($216 million) raised through dedicated co-investment vehicles, where outside investors put money to work alongside the Fund in certain transactions. Roughly 30% of the fund has already been deployed into partnerships related to the acquisition of rights to songs by KISS, Cyndi Lauper, Avicii and Swedish House Mafia.
Founded by by ABBA member Björn Ulvaeus and Conni Jonsson, of the Swedish global investment firm EQT AB, Pophouse has been acquiring the publishing, recording and name, image and likeness rights to iconic pop catalogs and then building entertainment experiences around them, through theatrical and virtual shows, museums and movies.
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Pophouse’s playbook has been at work through productions like The Avicii Experience, a tribute museum to the late dance music producer that opened in his hometown of Stockholm, Sweden, in 2021; Mamma Mia! The Party, an interactive dinner party set in London theater modeled after a taverna from the Greek island of Skopelos; ABBA Voyage, the band’s wildly successful virtual show that uses ABBA-tars to digitally depict the foursome as they looked in 1979, and ABBA The Museum, which opened in 2013.
KISS, which sold its name and likeness rights to Pophouse, has hinted that a virtual performance of its songs could launch in Las Vegas in 2027.
“By investing across publishing, recording, and brand rights, Pophouse has created a uniquely attractive prospect not only for investors but also for artists, empowering them to explore and amplify their legacy to new generations of fans,” Pophouse managing partner Johan Lagerlöf, said in a statement.
Pophouse’s CEO is Per Sundin, the first music industry label executive to partner with Spotify when he at Universal Music Sweden and president of the labe’s Nordic region business. Jonsson recruiting Sundin to helm Pophouse with the intention of taking advantage of the external business opportunities music rights present in the streaming era.
“Facing unprecedented disruption caused by streaming and technology, music intellectual property presents a differentiated, lifetime opportunity for investors,” Jonsson said in a statement. “We are reshaping the entertainment industry by applying an active, value-add approach that unlocks future generations for fandom.”
In December, Influence Media Partners, the music investing company backed by BlackRock and the Warner Music Group, joined the growing music industry trend of using asset-backed securitization to finance acquisitions and operations by raising about $360 million through a private placement in a deal lead by Goldman Sachs, sources say.
Besides the Influence Media deal, the waning months of 2024 also saw Concord raising $850 million through its third asset-backed bond offering run by Apollo Global Management in October; while Blackstone led a $1.47 billion securitization for its Hipgnosis Song Asset company. In each deal, the bonds and notes are collateralized by the music assets and income streams of the respective companies. The offerings from Concord and Hipgnosis have public filings with the appropriate regulatory agencies, but the Influence Media offering, as a private placement, does not have to file with the U.S. Securities and Exchange Commission.
As interest rates rise, asset-backed securities (ABS) are expected to become increasingly popular funding vehicles for music companies because they have fixed, five-year interest rates. In the past, Concord CEO Bob Valentine has compared these securitizations to fixed, low-interest-rate loans.
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Influence Media co-managing partner Lynn Hazan, the former CFO for Epic Records, worked with BlackRock executives on the deal, according to sources.
Influence Media, which was founded in 2019, has since bought stakes in some 30 music catalogs, and in early 2022 received additional funding to the tune of $750 million provided by BlackRock and the Warner Music Group. The acquired catalogs include music by Enrique Iglesias, Future, Logic, Julia Michaels, Ali Tamposi, Tainy and Harry Styles collaborator Tyler Johnson. The new funding is expected to be deployed in buying more music catalog assets.
Initially, it looked like the Influence Media Partners asset-backed securities offering was slow in coming together as bond investors looked at the Concord and Hipgnosis offerings, but in the end, the Influence offering — which also had Truist as the co-structuring and co-placement agent — came together nicely for the New York-based music investment company, attracting funding from about a half-dozen investors, sources say.
South Korea’s Financial Supervisory Service is investigating HYBE and its chairman, Bang Si-hyuk, over allegations he earned $285 million from the company’s 2020 initial public offering through profit-sharing deals with three large shareholders.
HYBE, then named Big Hit Entertainment, went public in 2020 after building its primary act, BTS, into global stars. The IPO raised approximately $820 million and confirmed HYBE’s arrival as a major player in the global music business. But while the IPO was a success for the company, many individuals who bought shares for well above the IPO price lost money as the price retreated in the following weeks.
Last week, The Korea Economic Daily broke the story that Bang personally pocketed about 400 billion won ($285 million) from agreements made with private shareholders STIC Investments, Estone Equity Partners and New Main Equity a few years before the IPO. Those agreements, according to the report, called for Bang to receive 30% of the shareholders’ profits from their sale of Big Hit shares following the IPO. But if Big Hit failed to go public before an agreed-upon time, Bang would have had to repurchase the shares plus interest.
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In a statement posted to HYBE’s investor relations website on Friday (Nov. 29), the company confirmed the existence of a shareholder agreement but dismissed the notion that Bang broke any securities law. “During the process of preparing for the listing, our company provided the relevant shareholder agreement to the listing underwriters, and the listing underwriters also reviewed the relevant shareholder agreement in accordance with the listing-related laws,” the statement reads. “In this regard, we have determined that our company did not violate any relevant laws during the listing process.”
A HYBE official provided more detail about the shareholder agreement in a statement to The Korean Herald. Prior to the IPO, one of HYBE’s investors requested to know the IPO timeline, which HYBE refused to share. Worried about unnamed uncertainties, the shareholder demanded a “put-back option,” or a right to sell an equity at a pre-determined price and time. But HYBE “couldn’t sustain itself under such conditions,” this person stated, and Bang “took on the risk himself” and personally agreed to the option.
South Korea’s Financial Supervisory Service was quoted in media reports as saying it’s investigating HYBE and Bang for possible violations of the country’s Capital Markets Act, including how a private equity fund acquired Big Hit shares prior to the IPO and whether Big Hit omitted information from its securities filing. The Korea Exchange stock market is also examining relevant documents for potential violations.
When Big Hit shares debuted on the Korea Exchange on Oct. 15, 2020, strong demand drove the share price from the 135,000 won ($118) IPO price to 351,000 won ($308) on its opening day. But Big Hit’s price fell 22.3% the next day and dropped another 29% over the next two weeks, leaving many individual investors with losses. (The stock rebounded over time. An investor who bought at the peak on the stock’s opening day could have sold for a profit had they waited one year.) The Korea Economic Daily article contended the drop-off was “largely driven” by the private equity fund’s “massive selloff” of Big Hit shares after the IPO.
