Existing investors cry after selling shares because there are no plans to list…Only newly-incorporated PEFs (Private Equity Funds) make a windfall
It was belatedly revealed that Chairman Bang Si-hyuk of HYBE and several private equity funds ( PEFs ) shared huge profits after HYBE's listing. These PEFs purchased shares from existing HYBE investors one to two years before HYBE's listing. When the PEFs hit the jackpot with HYBE's listing in 2020, the existing investors had to belatedly sell their shares. They all said, "At the time, HYBE had no IPO plans and could not guarantee the recovery of the investment, so we recommended these PEFs to sell your shares."
According to the financial investment industry on the 28th, PEF Stick Investment invested KRW 103.9 billion in October 2018 to purchase a 12.4% stake held by institutional investors such as LB Investment (6.08%). The following June, Easton PE acquired a 2.7% stake in HYBE for KRW 25 billion. At that time, he purchased part of the stake (4.6%) of Vice President Choi Yoo-jung, who co-founded HYBE with Chairman Bang. Easton PE was a new PEF established in April of that year by CEO Yang Jun-seok, who had a background in securities. It invested in HYBE shares just two months after its establishment. Kim Joong-dong, a former outside director of HYBE who brokered the deal between Chairman Bang and these PEFs , also joined Easton PE in June. In November of the same year, CEO Yang purchased an additional 100 billion won worth of shares through a joint investment with Newmain Equity, another new PEF . He acquired all of Alpenroot Asset Management’s shares, Vice President Choi’s remaining shares, and LB Investment’s preferred stocks, totaling 8.7%. And 11 months later, Hive went public. The average acquisition price of these PEFs was approximately 32,000 won (Stick and Easton 1) to 42,730 won (Easton 2), which is 23-29% of the public offering price (135,000 won). They sold a large quantity of shares at the upper limit (351,000 won) on the first day of listing, making a profit of about 10 times.
How did these PEFs get lucky with this large-scale investment opportunity just 1-2 years before HYBE's listing? Existing investors who sold shares to these PEFs said that there was direct and indirect involvement from HYBE. An official from Alpenroot, which sold HYBE shares to Easton PE and others, said, "HYBE's senior officials kept saying, 'There are no plans to list,' every time we met," and "they introduced Easton PE as a long-term investor." A HYBE official explained , “At the time, we were discussing attracting investment from global investors rather than an IPO , so we explained to (existing investors) that the IPO plan was uncertain.
Pretty shady of HYBE and borderline illegal...but not surprising in retrospect.
