Bang Si Hyuk acquires SM shares? HYBE responds, “We are continuously reviewing the situation”
Will HYBE led by Bang Si Hyuk acquire the shares of SM Entertainment?
On February 9th, HYBE stated, “Our company is continuously reviewing the matters related to our acquisition of shares, including the public purchase of SM shares, and nothing has yet to be confirmed as of the time of his announcement”.
They continued, “We will release another notice within one month or when specific matters in this regard are finalized”.
SM’s co-CEOs Lee Sung Soo and Tak Young Joon recently took a new leap forward in developing the company by announcing “SM 3.0: IP Strategy – Multi ‘Production Center/Label System’”. According to the announcement, SM plans to change its overall system by expanding IP beyond Korea and globally, accelerating IP production by entrusting business decision-making authority to each director, dividing SM artists into 5+1 production centers, including 5 separate labels and one virtual artist/IP production center facility, and establishing a subsidiary specializing in music publishing. SM also terminated its contract with executive producer Lee Soo Man, who is currently holding the largest stake and the decision-making power.
On February 7th, Kakao secured 9.05% of SM shares. This is a method of acquiring 1.23 million new shares issued by SM in the form of a paid-in capital increase assigned to a third party, and securing 1.14 million shares through the acquisition of convertible bonds. As a result, SM issued 1.23 million shares at 91,000 won per share, raising 111.9 billion won. At the same time, Kakao secured an additional 1.14 million shares of SM common stock through conversion of convertible bonds.
Consequently, Kakao became SM’s second-largest shareholder. Kakao, Kakao Entertainment, and SM also signed a three-way business agreement.
However, during this process, Lee Soo Man objected to the decision of the SM board of directors and announced to take legal action. He said through his legal representative, “It is illegal to issue new shares or convertible bonds to a third party to change the influence of management rights or control over the company in the event of a company’s management dispute. It is illegal as it infringes on the shareholders’ right to purchase new shares.”
Lee Soo Man’s legal representative added, “Nevertheless, the SM board unilaterally allocated new shares and convertible bonds to a third party to expand the stake in favor of the current management and secure an advantage in the competition for control.”