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LVMH set to lose W8b from drop in YG’s stock value

Despite YG Entertainment’s scheduled return of a 67 billion won ($56.6 million) investment to LVMH this week, the French luxury giant is still projected to lose around 8 billion won due to the decline in the K-pop agency’s stock value, local reports said Monday.

According to reports citing financial industry sources, LVMH also purchased 503,588 common shares of YG worth 20.3 billion won when it bought 1,359,688 redeemable convertible preferred shares in the entertainment agency via its investment unit, World Music Investment, in 2014. 

Former K-pop boy band BIGBANG member Seungri (Yonhap)
Former K-pop boy band BIGBANG member Seungri (Yonhap)

The condition for the preferred shares was that YG would convert them to common stocks at the price of 43,574 won per share or return 67 billion won in cash if LVMH preferred that option five years from the initial investment. YG is set to return the 67 billion won to LVMH on Tuesday, which is the maturity date.

Though LVMH chose the cash option for the preferred shares, it is expected to hold on to the common shares for some time. YG stocks were priced at 44,410 won per share at the time of the initial investment in 2014, but have lost nearly half of their value since then. The stocks were trading for around 25,000 won each on Monday. 

The company’s market capitalization and stock value have been dragged down by an industry-wide gambling, sex and drug scandal involving both Yang and its artists, which broke out earlier this year.

LVMH has yet to release any statement on the details of ownership of YG’s common shares.

By Jung Min-kyung (