Investors exercise their put options for repayment of convertible bonds, HYBE may have to pay back over $208 million

According to the Korea Securities Depository on September 27 KST, the exercise rate of the put option for HYBE's third convertible bonds, issued in November of 2021, has reached 68.58% as of today. In light of the series of negative issues surrounding HYBE, its artists, and its sub-labels, many investors are seeking redemption for what they consider a "losing investment". 

In November of 2021, HYBE issued convertible bonds worth over 400 billion KRW (~ $303 USD) to investors, with a conversion price set at 385,000 KRW (~ $292 USD). The put option attached to these convertible bonds allows the investors to request an early repayment of the bonds after a certain period, particularly when it is deemed that the shares cannot be converted for more than what they originally invested. 

As of September 27 KST, the exercise rate of the put option by HYBE's investors has reached nearly 70%. This means HYBE may have to repay its investors approximately 274.3 billion KRW (~ $208 million USD) by November 5 KST.

Notably, HYBE's single largest investor during the issuing of its third convertible bonds was Mirae Asset Securities, which purchased approximately 390 billion KRW (~ $295 million USD) worth of HYBE's convertible bonds in 2021. (During this process, the security firm sold 240 billion KRW to other investors and directly invested 150 billion KRW). The remaining 10 billion KRW was purchased by Han Sung Soo of Pledis Entertainment. 

What's more is that there is currently time left for investors to exercise their put options during the early redemption period, which closes on October 7 KST. HYBE Labels must then repay investors one mother after the end of the claims closing period - early November. 

It's projected that this substantial debt will significantly deplete HYBE's cash reserves. According to Korea Ratings Corporation, as of June of 2024, HYBE's cash and cash equivalents amount to 978.9 billion KRW (~ $742 million USD). If the put option rate reaches 100%, it could deplete nearly half of the company's cash reserves for 2024.

Industry insiders believe that HYBE's current stock outlook is not favorable, in part due to the company's multiple controversial issues and in another part due to the continued/projected inactivity of its major earners, such as BTS and Seventeen.