November 25, 2024

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Shares of YG Entertainment, the former management company of Seungri who is at the center of a sex bribery and corruption scandal, took a toll on March 21 one day after the National Tax Service raided it over alleged tax evasion.

On March 20 after the stock market closed, the tax agency dispatched about 100 investigators to secure tax-related documents at one of the biggest entertainment agencies.

The investigation was apparently triggered by the revelation that a nightclub called Love Signal turned out to be owned by YG Founder and chief producer Yang Hyun-suk, not Big Bang member Seungri. Even though the nightclub was supposed to be registered as an entertainment service operator, it was listed as a regular restaurant which allowed it to avoid individual consumption tax. 

The probe comes as President Moon Jae-in earlier this week ordered a thorough investigation of the Burning Sun scandal. Burning Sun is a nightclub owned by Seungri, who is under police investigation for offering prostitutes to his foreign investors. The scandal is escalating to involve a police officer who reportedly gave Seungri favors. 

Following the Burning Sun scandal, YG’s shares on secondary Kosdaq plummeted more than 26 percent from this year’s highest on Jan. 8 as institutional and foreign investors dumped its shares. But the fall was somewhat offset by individual buyers who turned net buyers for five trading days in a row since the scandal surfaced on Feb. 26. 

The investigation could be expanded and might be not be limited to the nightclub and YG, market watchers expect. The probe was conducted by the tax agency’s Investigation Team 4, famous for dealing with conglomerates or special cases and for this reason some foresee the probe on YG could spill over to other entertainment companies, whose shares were also hurt along with another sex scandal involving K-pop star Jung Joon-young.

   JYP Entertainment, SM Entertainment, Cube Entertainment and FNC Entertainment saw their share value wiped out more than 20 percent in the last two months along with YG.

Following the Burning Sun scandal, YG’s shares on secondary Kosdaq plummeted more than 26 percent from this year’s highest on Jan. 8 as institutional and foreign investors dumped its shares. But the fall was somewhat offset by individual buyers who turned net buyers for five trading days in a row since the scandal surfaced on Feb. 26.

Meanwhile, shareholders of YG are expected to vote on Friday to decide on the dismissal of CEO Yang Min-suk, the younger brother of Yang Hyun-suk, during a scheduled shareholders meeting.

Investors who hold more than 5 percent in YG include Global World Music Investment with 9.53 percent, Naver with 8.5 percent, Shanghai Fengying Business Consultant Partnership with 7.54 percent and the National Pension Service with 6.06 percent.

By Park Ga-young (gypark@heraldcorp.com)