YH Entertainment, China's largest artist management firm, has passed a listing hearing for an initial public offering in Hong Kong, which could raise up to US$200 million (HK$1.56 billion).
The Beijing-based firm reportedly started pre-marketing activities last week to gauge institutional investor interest and plans to raise between US$150 million and US$200 million, according to International Financing Review.
The IPO comes amid a series of crackdowns in China on the entertainment industry, celebrities and fan culture.
Founded in 2009 by Du Hua, who owns a 53.5 percent stake with her husband, the firm has 66 managed artists and 71 trainees, and counts Alibaba (9988) and Tiktok's parent ByteDance among its investors.
Its top artists include actor Wang Yibo, who debuted as a member of the Korean-Chinese boy band Uniq and became a major celebrity in China overnight after starring in a hit queer romance novel-based drama, The Untamed, which had more than 5 billion views within two months after its release in 2019.
YH Entertainment's revenue rose 40 percent to 1.29 billion yuan (HK$1.59 billion) last year from 2020, with the artist management business - which includes all the revenue the artists earn from commercial activities or programs - accounting for more than 90 percent of the total.
However, the growth in revenue slowed to 3.4 percent to 352.9 million yuan in the first four months this year from a year ago, the updated prospectus showed.
While it did not disclose how much it earned from major artists like Wang, YH Entertainment said the total amount paid to its top five artists took up 62 percent of its costs last year.
In addition to Wang, YH Entertainment is home to Korean actor Han Geng, who joined the company in its early years and now holds a 2.5 percent stake in it.
Du set up a subsidiary in South Korea and worked with local firms after signing Han to build a K-pop-style trainee program for the company. The company saw five of its artists and trainees among final winners in Idol Producer and Produce 101 China, after these reality shows hit the big time in China in 2018.
The total amount of money raised by fans on one single crowdfunding platform for contestants at the final round of Produce 101 China exceeded 20 million yuan, with over 210,000 people joining, data from platform Modian showed.
However, China last year started to crack down on the entertainment industry by banning idol reality shows, frowning on artists with "effeminate" styles, and strengthening tax regulations on celebrities.
YH Entertainment said in the filing its business could be adversely affected due to evolving policies and other legal uncertainties as "the entertainment industry is extensively regulated in China."
The company also faces a challenge in retaining talent in the short to medium term, as its contracts with Wang end in 2026 while those with Han will expire in two years.
To reduce risks, YH Entertainment is investing in virtual artists as they have "lower management costs and more application scenarios."
But virtual idols are not free of risks.
YH Entertainment drew a lot of flak from fans after it cancelled livestreams of Carol from virtual band A-Soul amid reports that the artist behind the digital star was overworked and underpaid.
Created by ByteDance and promoted by it, the band of five digital girls helped YH's pan-entertainment business record an 80 percent growth in revenue to 37.9 million yuan last year despite taking up less than 3 percent of the total revenue.
YH Entertainment's net profit rose 14.9 percent to 335.3 million yuan in 2021 from a year earlier, but it paid 600 million yuan worth of dividends over the last two years, which is close to its total net profit of 746 million yuan over the last three years.
The IPO proceeds will be used to purchase training centers, expand the artist promotion and the music library as well as make future acquisitions, it said.
