The K-pop star sex scandal has taken a heavy toll on the country’s entertainment business, shaving combined market capitalization of the country’s big five entertainment stocks by 587 billion won ($517.6 million) less than three weeks.

According to the nation’s sole stock exchange operator Korea Exchange (KRX) on Sunday, the combined market value of the country’s five major entertainment companies lost 587 billion won or 17.52 percent to 2.76 trillion won on Friday from 3.35 trillion won on Feb. 25. The five listed firms are YG Entertainment, JYP Entertainment, SM Entertainment, Cube Entertainment, and FNC Entertainment.

The rout in entertainment stocks came after police launched investigations into various sex and drug scandals involving big K-pop star Seungri, a member of internationally acclaimed boy group Big Bang managed by YG Entertainment, and sing-a-song writer and popular TV personality Jung Joon-young, who is accused of sharing spy-cam videos showing him having sex with women.

Seungri went in for voluntary questioning on Feb. 26 on a number of criminal charges including embezzlement, drug abuse and brokering prostitution for investors to his businesses. He was brought in again for another questioning last week after a news report that he and his fellow idol stars and acquaintances, including Jung, shared sex videos and photos, believed to be filmed without the consent of the women, through a group chat room. Immediately after the report, Seungri apologized for causing troubles and announced his retirement from his entertainment business.

The Seungri scandal was initially triggered by suspicions that serious crimes including narcotics use and sexual violence have been frequently committed at the Burning Sun, a club in Gangnam district in southern Seoul, in which Seungri had stakes. The club is also suspected of having bribed local police.

His management company YG Entertainment’s shares fell 4.42 percent on Feb. 26 from the previous session, setting off a downward spiral in other entertainment stocks, and nosedived 24.84 percent until March 15, losing 214.6 billion won in market capitalization over the cited period.

Shares of FNC Entertainment also tanked 22.24 percent from Feb. 26 to March 15 on news that Choi Jong-hoon, a member of band FT Island, and Lee Jong-hyun, a member of rock band CNBLUE, actively took part in the conversation at the chat room where Jung shared his sex videos and photos. Both boy bands are managed by FNC Entertainment. Choi and Jung all announced their retirement from the show business, while Lee apologized for his wrongdoings.

Shares of SM Entertainment and Cube Entertainment also plunged 21.29 percent and 25.88 percent, respectively, during the cited period although their artists are not directly embroiled in the Seungri scandal.

Investor sentiment on entertainment shares has soured so much that investors even dumped shares of top JYP Entertainment that announced preliminary earnings for last year exceeding market consensus. Its shares fell 5.54 percent over the same period.

Due to the recent downfall in entertainment shares, the country’s biggest institutional investor National Pension Service saw the total market value of its 6.06 percent holding in YG Entertainment and 8.15 percent in SM Entertainment lose 33.2 billion won – 14.0 billion won in YG Entertainment and 19.2 billion won in SM Entertainment – over the same period.

Angry and disappointed retail investors of these stocks even proposed filing a claim for damage against Seungri.

By Chung Seul-gi and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]