[비즈한국] Han Bo-hyun (19), the son of FNC Entertainment CEO Han Sung-ho (52), has acquired a stake in FNC Entertainment, drawing significant attention from the entertainment industry. CEO Han Sung-ho is the founder and largest shareholder of FNC Entertainment, holding a 22.34% stake. As the son of the CEO, Han Bo-hyun is considered the primary candidate for future management succession. While the entertainment industry has established itself as one of the major business sectors in Korea, few entertainment companies have successfully transitioned management to the next generation.
FNC Entertainment is a management agency well-known for housing numerous band artists. In addition, the company manages actors and produces dramas. Key artists under the label include FTISLAND, CNBLUE, and N.Flying. The company also previously operated an entertainment and broadcast personality management division, but ceased those operations this past January. At the time, FNC Entertainment stated, “We will accelerate growth by expanding profitability, focusing on our core businesses such as the music business, actor management, and drama production.” FNC Entertainment was listed on the KOSDAQ market in 2014.
According to electronic disclosures from the Financial Supervisory Service, Han Bo-hyun acquired a 0.11% stake in FNC Entertainment last August. This marks Han’s first purchase of FNC Entertainment shares. He invested approximately 49.88 million won at an average purchase price of about 2,250 won per share. FNC Entertainment's stock price hit 5,100 won in April of this year but has been on a downward trend since. Han bought the stake while the stock price was falling. However, the price continued to decline afterward and currently hovers around the 2,000 won range.
Some analysts suggest that Han’s stock purchase is a move with management succession in mind. However, given that the stake is small and he is still young, experts evaluate that the possibility of his immediate participation in management is low.
There are other interpretations. Some believe the stake was acquired not for succession, but to signal a commitment to boosting the company's stock price. In fact, not only Han Bo-hyun but other specially related persons of CEO Han Sung-ho have been rushing to purchase FNC Entertainment shares. Han Seung-hoon, CEO Han’s younger brother and president of the marketing division at FNC, acquired a 0.19% stake in July. Kim Yu-sik, co-CEO of FNC Entertainment, also purchased a 0.13% stake in July. Consequently, President Han Seung-hoon’s stake increased from 8.19% to 8.38%, and co-CEO Kim Yu-sik’s stake rose from 0.55% to 0.68%.
FNC Entertainment’s stock price has been declining since April of this year, with no clear signs of a rebound. According to the semi-annual report, FNC Entertainment's revenue increased by 30.16% from 37.9 billion won in the first half of last year to 49.3 billion won in the first half of this year. However, profitability has been poor, as evidenced by an operating loss of 2.6 billion won in the first half of this year. From the management's perspective, boosting the stock price is a pressing matter. This is why many analysts suggest that the share purchases by those closely related to CEO Han are intended to bolster the stock price rather than consolidate management control.
A securities industry official analyzed, “Recently, most entertainment companies, whether large or small, have been performing poorly in terms of stock trends. While the entertainment industry is growing, corporate profitability is low, and it seems the peak of the K-pop craze may have passed.”
Others speculate that the moves are aimed at defending management control. Although CEO Han Sung-ho is the largest shareholder, his control cannot be considered absolute. The total stake held by CEO Han and his specially related persons is 34.75%. The Chinese company Suning Universal Media holds a 20.53% stake in FNC Entertainment. While Suning is known to have a friendly relationship with FNC, the possibility of a change in their stance cannot be ruled out. In 2015, Suning disclosed that its purpose for holding FNC Entertainment shares was not mere investment, but for management participation. Additionally, as of the end of June, Kakao Entertainment and Timefolio Asset Management held 4.22% and 1.95% stakes in FNC Entertainment, respectively.
Bizhankook reached out to FNC Entertainment for comment regarding Han Bo-hyun’s stock purchase but did not receive a response.