How to buy Big Hit Entertainment stock from Canada

Big Hit Entertainment is now publicly trading. Here's how to invest.

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Big Hit Entertainment, the record label behind popular K-pop boy band BTS, is now publicly trading on the Stock Market Division of the Korean Exchange (KRX) in South Korea. The stock opened at 270,000 won (around CAD$315) and saw a surge in price its first day, followed by a second-day drop.

Volatility immediately after an IPO isn’t unusual, and it’s too early to tell what the long-term movement of the stock could look like. If you’re willing to bet that the label’s value will grow, the best way for Canadian investors to gain exposure is by purchasing an ETF that invests in South Korean stocks.

Note: all dollar amounts on this page are in US dollars unless otherwise stated.

How to invest in Big Hit Entertainment from Canada

Because Big Hit Entertainment’s stock will only be available on the South Korean market, it may be difficult for Canadian investors to buy stocks. But there are a couple of ways you can gain exposure.

1. Buy ETFs

The easiest way to gain exposure to South Korean stocks is invest in exchange-traded funds (ETFs) that offer international coverage — specifically those that invest in South Korean stocks, like the Vanguard FTSE Developed Asia Pacific All Cap Index ETF (VAH:TSX) or the iShares Core MSCI Emerging Markets IMI Index ETF (XEC.TSX).

While this doesn’t allow you to buy Big Hit Entertainment stock directly, it does give your portfolio exposure to South Korean stocks — possibly including Big Hit.

2. Use an international brokerage account

Many Canadian brokerages only offer access to Canadian stock exchanges like the TSX. If you plan to buy Big Hit Entertainment shares, you’ll need an international brokerage account that allows you to buy and sell shares on overseas markets But it may be difficult.

Most brokerage accounts available in Canada don’t offer access to the South Korean markets. However, Interactive Brokers provides access to securities options on the Korean Exchange.

South Korea places restrictions on foreigners buying stock, which means that to invest you’ll need to do extensive research and fill out the appropriate paperwork. This option is best suited to advanced investors who plan to buy stocks in South Korea on a regular basis and/or make high-dollar investments.

Learn more about Interactive Brokers

Note: the dollar amounts in this table are in CAD.

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What we know about the Big Hit Entertainment IPO

Demand for Big Hit Entertainment’s stock is high among retail and institutional investors alike. In fact, some 1,420 institutional investors wanted pre-subscription access to Big Hit’s IPO, amounting to 1,117 times the subscription amount allotted to institutional investors.

The stock was originally expected to cost 135,000 won, but ended up opening much higher at 270,000 won (USD$235). The stock launched on October 15 in South Korea, and is now trading on the KOSPI. The company’s pre-IPO valuation stood at $4.1 billion, making this South Korea’s biggest IPO since 2017.

Unfortunately, shares aren’t be available on any Canadian domestic exchanges, and so far we haven’t heard anything suggesting the company is planning to launch a Canadian IPO. If you want to purchase stocks from Canada, you’ll need an international brokerage account.

Company history

Big Hit Entertainment is an entertainment company founded in 2005 by Bang Si-hyuk and headquartered in Seoul, South Korea. With nearly 800 employees, the company manages and produces music for a number of K-pop groups and solo acts, including J-Hope, Lee Hyun, TXT and boy band sensation, BTS — the cause of Big Hit’s IPO buzz.

Despite managing numerous solo performers and groups, most of Big Hit Entertainment’s incoming cash comes from BTS. In 2019, 97% of the company’s revenue was BTS-related. And now that the company is going public, fans of the seven-member K-pop idol group are clamoring to get their hands on a slice of what’s being referred to as BTS stock.

The good news is that the members of BTS are profiting from Big Hit Entertainment’s IPO — as they should. The company awarded each member of the band 68,385 shares, amounting to $7.9 million apiece.

Tax implications of buying foreign stocks in Canada

When you earn money on investments purchased outside Canada, you may trigger 2 types of taxes — income tax paid to foreign governments (called a withholding tax) and income tax paid to the CRA.

However, in most cases, if you purchase stocks on a foreign stock exchange and hold your stocks in a non-registered account like a cash account or margin account, you only have to report interest income to the CRA. But if you choose to hold stocks in a registered account like an RRSP, RRIF or TFSA, this exception does not apply.

If you end up being double taxed, you can file Form T2209 — Federal Foreign Tax Credit in Canada to get a credit of up to 15% on withholding taxes you paid to another country, provided you report the same income to the CRA. Business entities that hold foreign stocks valued over $100,000 CAD must also file Form T1135 – Foreign Income Verification Statement except in certain circumstances like when stocks are held in an RRSP.

When filing a Canadian tax return, all foreign amounts must be converted to Canadian dollars based on (1) the exchange rate on the exact date you received foreign investment income or (2) the Bank of Canada’s average annual exchange rate.

Calculating and filing taxes on foreign investments is complicated. Speak with a tax professional to make sure you understand your obligations.

Investing for the future

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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