HYBE's spat with NewJeans' ADOR costs it $619 million in market cap

ADOR CEO Min Hee-jin, left, and girl group NewJeans, managed by HYBE subsidiary ADOR [ADOR]

HYBE lost more than 850 billion won ($619 million) in market cap in two days as the K-pop powerhouse behind BTS clashes with the CEO of subsidiary label ADOR, which manages the girl group NewJeans.

HYBE’s share price plunged to a low of 202,500 won on Tuesday morning, a drop of 4.71 percent from the previous closing price, before rebounding to close at 210,000 won, down 1.18 percent.

The company's shares plummeted 7.81 percent on Monday to close at 212,500 won following reports that it launched a probe against executives of ADOR, including CEO Min Hee-jin, over an alleged attempt to seek independence.

Following the most recent selling spree, HYBE’s market cap shrank from 9.6 trillion won on Friday to 8.75 trillion won on Tuesday, with 853 billion won evaporating in two days.

ADOR is majority-owned by HYBE, which holds an 80 percent stake, while 18 percent is owned by Min, the figure accused of spearheading the breakaway scheme.

While witnessing a sharp drop in share price on Tuesday, HYBE partially regained its losses by market close from its lowest point. Analysts forecast that the recent standoff is not likely to have a significant impact on its long-term earnings, citing ADOR’s limited contribution to the parent company’s revenue.

“In a worst-case scenario where HYBE excludes NewJeans from its artist line-up, we expect it will have an impact of less than 10 percent on [HYBE’s] annual revenue and operating profit this year,” said Park Su-young, analyst at Hanwha Investment & Securities in a report Tuesday.

NH Investment & Securities analyst Lee Hwa-jeong estimated that the subsidiary's contribution to the top label's annual operating profit last year stood at 11 percent, and will amount to 14 percent this year.

“Considering that BTS will make a full comeback in 2025, [ADOR’s] contribution is expected to shrink further,” according to Lee.

Oh Ji-woo, an analyst at eBest Investment & Securities, pointed out that “the contractual rights regarding NewJeans’ members are vested in HYBE, and therefore scheduled events and other projects are likely to continue as planned.”

In the meantime, the rift between HYBE and ADOR continued to widen as the two parties churn out accusations.

Internal documents from the agency behind NewJeans listed multiple financial firms and ways to reclaim management rights, confirmed HYBE on Tuesday as part of its internal audit into its subsidiary.

The objective of the document was summarized as "Keeping [HYBE's] hands off of us and getting away" with it, according to HYBE.

The documents detail different scenarios to curb HYBE’s management control over ADOR, including pressuring HYBE to sell shares of ADOR to private equity firms.

Media outlets reported that the listed firms are suspected to be GIC, a Singaporean sovereign wealth fund, and PIF, Saudi Arabia’s sovereign wealth fund.

Another scenario involved setting up a new unit with NewJeans.

Min denied the claim, saying that she neither has the intention to seize management control nor has met with investors.

She contended that HYBE was trying to fire her after she raised claims that ILLIT, a rookie girl group under the parent label, copied the concept of NewJeans.