YG Entertainment is preparing for a big hit to their bank accounts following the discovery of 2 separate rulings that will cost the company over $60 million USD.
The first ruling that makes up the majority of the money stems from a 5 year deal with LVMH (LVMH Moët Hennessy, also known as Louis Vuitton SE). Through its investment company Great World Music Investments, they invested ₩61.05 billion KRW ($51,599,154 USD) into YG Entertainment in October 2014.
At the time of the investment, LVMH had it written into the agreement that at the end of 5 years, they would be able to convert their redeemable convertible preference shares into regular shares at the price point of ₩43,574 KRW ($36.83 USD) per share, or they could receive their entire ₩61.05 billion KRW investment back, along with 2% interest for a total of ₩67 billion KRW ($56,628,065 USD)
With this deal, if YG Entertainment’s stock was worth more than the ₩43,574 KRW ($36.83 USD) agreed upon amount at the end of the 5 year term, LVMH would be able to convert their preference shares to regular shares, and receive a profit. If the prices are lower than the agreed upon amount, LVMH could recover their investment, avoid losses, and still receive a little bit of extra money.
Back in October 2014, YG Entertainment’s stock was valued between ₩45,400 KRW ($38.37 USD) and ₩51,000 KRW ($43.10 USD), making it seem like a good investment at the time.
However, now, due to the myriad of scandals surrounding YG Entertainment, their stock value currently is worth ₩23,050 KRW ($19.48 USD) a share, meaning that YG Entertainment is in a state of fait accompli, or in a state where they have no other choice but to accept their fate.
The other issue that just resurfaced about YG Entertainment was the results from their tax investigations that started 6 months ago, back in March 2019.
Insider sources revealed on September 16 that the investigations into YG Entertainment and Yang Hyun Suk have concluded and that while they would not charge YG Entertainment or Yang Hyun Suk with tax evasion.
The two parties will be hit with a total of around ₩6 billion KRW ($5,070,330 USD) in fines, bringing the total amount they owe to others a whopping ₩73 billion KRW ($61,689,015 USD).