A subsidiary of SM Entertainment will be listed on the KOSDAQ market by the second half of this year.
Keep on reading to know more.
SM Entertainment's Subsidiary 'Dear U' to Go Public on KOSDAQ in the Second Half of 2021
Dear U, a subsidiary of SM Entertainment will be listed on the KOSDAQ market as early as the second half of this year. The subsidiary operates the platform "Dear U Bubble," which was established in 2017. "Dear U Bubble" is a platform for fans and artists to communicate, and when Dear U is listed, it will be the first company that solely focuses on operating a fandom platform.
According to reports, Dear U had an impact on the improvement in earnings of SM Entertainment in the first quarter of 2020. SM Entertainment was at a deficit, but with Dear U - which is an experimental subsidiary - the company began to see growth. In addition, SM Entertainment owns 71 percent of shares in Dear U.
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According to the entertainment industry and the investment banking industry on May 27, Dear U is currently undergoing due diligence to apply for a preliminary examination for listing at the Korean Exchange. An official of Dear U said, "We are preparing to list Dear U in the second half of the year." In addition, the subsidiary selected Korea Investment & Securities as the listing organizer from July to August last year.
The core business of Dear U, "Dear U Bubble," launched in 2020 and is a chat service platform that allows artists to write messages and send them to fans, while fans can also reply to them. The application is available for download, with a 4,500 won ($4) subscription per month. Currently, "Dear U Bubble" has more than one million subscribers, of which 72 percent are global users.
Besides SM Entertainment, JYP Entertainment, FNC Entertainment, Jellyfish Entertainment, Brand New Music, and more than 30 artists are on the platform.
Currently, in the entertainment and content industry, fan platforms and services such as Dear U are being expanded. Before Dear U introduced "Dear U Bubble" last year, Naver had already established itself as a platform for celebrities and fans to communicate through the live-streaming platform, "V-Live," since 2015.
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Also, Weverse Company, a subsidiary of HYBE (formerly Big Hit Entertainment), has been managing "Weverse," which has promoted BTS, TXT, and other artists under HYBE since 2019. NCSoft also created the "Universe" app earlier this year. In addition, startups such as Makestar, which offers crowdfunding projects and sells fandom goods, are also of great interest.
IBK Securities estimates that the market size of the fandom economy will reach 7.9 trillion won ($7 billion).
An official from a venture capital said, "Dear U is a new company among fan platforms, but having strong intellectual property rights (IP) like SM Entertainment's artists is a strong point."
Dear U is evaluated to be a subsidiary with growth potential within the SM Entertainment Group. According to reports, Dear U's first-quarter sales were reportedly 8.9 billion won ($7.9 million) with an operating profit of 3.2 billion won ($2.8 million). It earned more than half of last year's total sales of 13 billion won ($11.6 million) only in the first quarter.
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The combined operating profit of SM Entertainment's other subsidiaries was recorded at 3.1 billion won ($2.7 million), thanks to Dear U's first-quarter earnings increase. This is the first time since 2016 that the earnings were a surplus, with the deficit from 2019 to 2020 was around 19 billion won ($17 million).
Park Seong Ho, a researcher at Yuanta Securities, an insurance company, said, "The more artists participating in "Dear U Bubble" and the number of fans following them, the higher the profits of Dear U will be."
Dear U is the fifth company to be listed out of the 15 affiliates of SM Entertainment. Currently, SM C&C, KeyEast Entertainment, SM Life Design Group, and Galaxia SM are listed.
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Written by Robyn Joan
