A new report from South Korean financial publication The Bell is drawing attention to a question that has lingered since the beginning of the HYBE-Min Hee-jin dispute: How was ADOR able to swing from losses to profitability so quickly, and what role did NewJeans’ blockbuster success play in that turnaround?
According to The Bell, part of the answer may lie in a massive inventory buildup that occurred during Min Hee-jin’s tenure as CEO. The publication argues that the same strategy that helped improve ADOR’s financial results in 2023 may now be creating a burden for the company’s current management.
The theory centers on one of NewJeans’ most successful releases: Get Up.
The Inventory Question
Using filings from South Korea’s Financial Supervisory Service electronic disclosure system, The Bell noted that ADOR’s inventory assets increased dramatically following the release of Get Up.
Inventory assets rose from approximately ₩1.9 billion ($1.24 million) in 2022 to ₩11.3 billion ($7.39 million) in 2023, a surge that coincided with the album’s release and record-breaking sales.
The publication believes a significant portion of that inventory consisted of albums, CDs, vinyl records, and merchandise related to NewJeans.
The issue, according to the report, is that inventory only has value if it can eventually be sold.
While inventory is recorded as an asset on a company’s balance sheet, unsold inventory can eventually lose value and may later need to be written down as a loss.
How Large Album Orders Can Improve Profitability
The report argues that Min Hee-jin’s strategy involved ordering a very large number of albums.
According to the article, approximately 3.5 million copies were produced, while roughly 1.6 million copies remain unsold.
To understand why this matters, it helps to look at how album production costs are calculated.
- Producing an album involves much more than manufacturing a physical CD. Costs include:
- Song production
- Recording
- Music videos
- Styling
- Makeup
- Photography
- Packaging
- Marketing
Many of these expenses are fixed costs that exist whether a company produces 500,000 albums or 3 million albums.
As production volume increases, those fixed costs are spread across a larger number of units.
For example, imagine a company spends $1 million creating an album.
If it only produces 500,000 copies, the production cost allocated to each album would be approximately $2.
If it produces 2 million copies instead, the production cost allocated to each album falls to about 50 cents.
Large manufacturing orders can also reduce production costs because suppliers often offer lower per-unit pricing for larger orders.
The result is a lower cost of goods sold, commonly referred to as COGS.
What Happened to ADOR’s Profit Margins?
According to The Bell, ADOR’s cost-of-sales ratio dropped sharply from 81.8% in 2022 to 58% in 2023.
That decline is significant because it means a smaller portion of every sales dollar was consumed by production costs.
As margins improved, ADOR’s financial performance improved dramatically.
The company moved from an operating loss of approximately ₩4 billion ($2.62 million) in 2022 to an operating profit of approximately ₩33.5 billion ($21.91 million) in 2023, a swing of roughly ₩37.5 billion ($24.53 million) in just one year.
The publication argues that part of this improvement came from the inventory buildup itself.
Why Inventory Can Make Profits Look Stronger
When products are manufactured but not yet sold, many associated costs remain on the balance sheet as inventory rather than immediately appearing as expenses.
That means inventory can temporarily support reported profitability.
Using a simplified example:
- Imagine a company produces 3 million albums.
- If it sells 1 million copies, it records profits from those sales.
- The remaining 2 million albums are still carried as inventory assets.
As long as those albums are expected to be sold, they continue to appear on the balance sheet as something of value.
From an accounting perspective, this can help support stronger financial results.
The problem emerges later if those albums do not sell.
When Inventory Becomes a Problem
The Bell’s argument is that inventory that appeared valuable in 2023 may not be nearly as valuable in 2025.
Financial filings show that ADOR’s inventory assets declined from approximately ₩15.8 billion ($10.33 million) in 2024 to approximately ₩15.1 billion ($9.87 million) in 2025.
In other words, inventory decreased by only about ₩700 million ($457,000) over the course of a year.
That suggests ADOR was unable to move a substantial amount of its remaining inventory.
The report also noted that the assessed value of inventory declined significantly. Inventory that once carried substantial accounting value may now require write-downs as demand weakens and products age.
Physical albums are not like real estate or gold. Their value is closely tied to consumer demand.
An album that was highly desirable during a comeback cycle may be much harder to sell two years later.
If inventory can no longer be sold at its recorded value, accounting rules often require companies to recognize losses.
The Put Option Question
The article also raises another issue.
The publication argues that stronger profitability increased the value of that put option.
The report stops short of claiming that this was the purpose of the inventory buildup. Rather, it argues that the accounting impact of the strategy contributed to stronger reported results during the years used in the calculation.
Whether that was intentional or simply a consequence of aggressively forecasting demand for NewJeans remains open to interpretation.
A Theory
It is important to note that The Bell presents this as a financial analysis rather than a proven finding.
There is also an alternative explanation.
NewJeans was one of the biggest music acts in South Korea at the time, and it is entirely possible that management genuinely believed demand would support production of millions of albums.
Forecasting future sales is an imperfect process, particularly when dealing with a group experiencing explosive growth.
The central argument of the article is not necessarily that the inventory buildup was improper.
Rather, it is that a strategy that may have helped improve ADOR’s profitability in 2023 has become much harder to justify in 2025, as unsold inventory remains in warehouses and some of the assets that once supported profitability begin losing value.
In short, what may have appeared to be a valuable asset during NewJeans’ peak sales period could now be transformed into a financial burden for the management team tasked with moving forward without the group actively promoting under ADOR.
