HYBE’s cash reserves on the verge of fallout; might have to return over 200 mn USD to the investors

HYBE faces a significant risk of running out of funds with the put option rate for its third convertible bond, issued in 2021, rising by more than 80%. This suggests that many HYBE investors are attempting to recover their losses on what they may consider to be a dubious investment.

An early redemption claim on a put option entitles investors to an early redemption of the bond principal after a predetermined amount of time. As of September 27, the third convertible bond issued by HYBE has a put option exercise rate of 81.08%, according to the Korea Securities Depository. When the early redemption date comes around on November 5, HYBE will have to reimburse investors with over ₩324 billion KRW (roughly $248 million USD).

Since the issuance of the third convertible bond, the price of HYBE’s stock has been declining. They closed at ₩170,000 KRW (about $130 USD) on September 26, KST, which is half of the conversion price that was set at ₩386,000 KRW (around $294 USD) in 2021.

Mirae Asset Securities was the single largest investor in HYBE during the third convertible bond offering. In 2021, it acquired bonds valued at around ₩390 billion KRW, or $298 million USD. Han Sung Soo of Pledis Entertainment invested the remaining ₩10.0 billion KRW, or roughly $7.63 million USD.

October 7 is the deadline for investors to exercise their put options during the early redemption period. One month following the conclusion of the claims closing period, HYBE is required to reimburse the investors. As of June 2024, the conglomerate’s cash assets are valued at ₩298 billion KRW, or roughly $228 million USD, according to Korea Ratings Corporation.

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