SM Entertainment's third quarter results fell short of expectations.

SM Entertainment reported their quarterly report to the Financial Supervisory Service at 2:12 PM KST on the 14th. According to their report, SM Entertainment's third quarter profit was 11.7 billion KRW (approximately $10.7 million USD). This is a 70% increase compared to the same period last year, but the result was only half of analyst expectations of 20 billion - 23 billion KRW (approximately $18.4 million - $21.1 million USD).

As a result, SM Entertainment stocks fell nearly 15%, and hit its low at 2:25 PM. Analysts at the stock exchange fell into a state of confusion. One analyst said, "I haven't even seen the report yet, but I don't even have time to think because people keep calling non-stop. We currently don't know why this happened."

SM Entertainment explained that the shortcoming was due to the high production costs for the TVXQ and Super Junior arena tours. However, experts have judged that the reasoning was flawed. One analyst said, "There could be some issues internally if we have this much of a difference." The arena tour was actually one of SM Entertainment's largest favorable points. Analysts had predicted that the 3rd quarter earnings would see an explosive increase mainly because of the arena tours as their Japanese tours held earlier in the year brought in an audience of nearly 1,000,000 people.

The resulting shock caused SM Entertainment stocks to drop 14.88% to 58,900 KRW (approximately $54 USD) per share. Not only so, but the drop affected other entertainment companies as well. YG Entertainment dropped 13.86% to a stock price of 64,000 KRW (approximately $59 USD) per share, and other entertainment labels dropped 4 to 8% as well.

Source: Chosun Biz
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