[Featured Stock] SM Shareholders' Meeting Delay ↓ Activist Fund Victory ↑ "Volatility"

by Lee Seonae

Published 31 Mar.2022 13:57(KST)

[Asia Economy Reporter Lee Seon-ae] On the 31st, SM's stock price fluctuated wildly. According to the Korea Exchange, after opening at 79,700 won, the regular shareholders' meeting was delayed by more than two hours, causing the price to drop to 77,400 won. Amid a vote battle over the appointment of an auditor between the largest shareholder, producer Lee Soo-man, and the activist fund Align Partners Asset Management, the Align side won, sparking expectations for improved governance and pushing the stock price to a new high of 85,600 won.

As of 1:53 PM, SM's stock price was trading at 81,900 won, up 2.89% from the previous trading day.

Meanwhile, at the shareholders' meeting, SM appointed Kwak Jun-ho, former Chief Financial Officer (CFO) of SK Nexilis, as auditor. Former CFO Kwak was a shareholder proposal from Align. Among approximately 8.03 million shares held by attending shareholders, about 6.53 million shares supported Kwak's appointment as auditor. Regarding the auditor appointment, Im Ki-young, a non-executive advisor of the Halla Group recommended by the board, voluntarily resigned.

Earlier, Align argued that despite SM's outstanding business performance, it was undervalued due to governance shortcomings, and that an independent auditor recommended by external shareholders was necessary for the board to fulfill its role. In particular, Align pointed out the producing service contract with Like Planning, a personal company of largest shareholder Lee Soo-man, and sent an open shareholder letter to SM's board requesting reasonable alternatives by referring to cases in the same industry such as HYBE and JYP (JYP Ent). Like Planning was also a concern raised three years ago by KB Asset Management through a shareholder letter.