K-pop stocks dip briefly on report of antitrust probe on production

• Shares of SM Entertainment and Hybe fell in early trade after a reported probe by South Korea's Fair Trade Commission.
• While SM Entertainment and Hybe saw losses, YG Entertainment was in positive territory, gaining over 2%.

INDIO, CALIFORNIA - APRIL 15: (L-R) Jisoo, Lisa, Jennie, and Rosé of BLACKPINK perform at the Coachella Stage during the 2023 Coachella Valley Music and Arts Festival on April 15, 2023 in Indio, California.

Frazer Harrison | Getty Images Entertainment | Getty Images

Shares of K-pop agencies dipped briefly on Wednesday after a reported investigation by South Korea's antitrust watchdog.

South Korea's Fair Trade Commission launched an investigation into allegations of power abuse in the large entertainment agencies, South Korean local media Yonhap News reported Wednesday, citing unnamed industry sources.

The report said government agencies sent "examiners" to the offices of Hybe, SM Entertainment, YG Entertainment, according to a CNBC translation of the article.

Yonhap reported that these companies have allegedly violated the nation's "subcontracting law," including using verbal contracts instead of written documents and delaying payment when producing albums and merchandise.

Hybe, the agency behind BTS, saw its shares fall as much as 3%, while SM Entertainment fell as low as 2.19%. Both stocks pared some of their losses by lunch break on Wednesday.

YG Entertainment, which manages girl group Blackpink, saw a smaller loss of up to 1.49%, but reversed course to trade 2.23% higher.

When contacted by CNBC, South Korea's FTC said they could not confirm or deny the Yonhap report. Hybe said that it has no comments, while YG Entertainment and SM Entertainment did not respond to requests seeking comments to the Yonhap report.

— CNBC's Kimberly Kao contributed to this report.