Hive Becomes Largest Shareholder of SM... "SM Management Should Make Rational Decisions"

[Asia Economy Reporter Lee Seung-jin] HYBE, the agency of the group BTS, has become the largest shareholder of SM Entertainment.

On the 22nd, HYBE announced that it had paid for and acquired 14.8% of the shares previously held by former SM Entertainment Chief Producer Lee Soo-man.

To HYBE’s Current Management: "Make Rational Decisions"

On the 10th, HYBE signed a contract to purchase 14.8% of the shares from former Chief Producer Lee for 422.8 billion KRW. The original scheduled date for HYBE to acquire SM shares was the 6th of next month, but the payment was made 12 days earlier, finalizing the transaction.

HYBE CEO Park Ji-won released a statement saying, "We have resolved the governance issues related to former Chief Producer Lee," and added, "SM will move forward as a company with exemplary governance that prioritizes shareholder rights."

Park emphasized the synergy between HYBE and SM. In particular, he refuted claims made on the 20th by SM CFO Jang Cheol-hyuk via YouTube, who argued that SM’s new growth plan, 'SM 3.0,' would be disrupted by HYBE’s acquisition.

Park stated, "HYBE and SM are pioneers and leaders in the K-POP industry, achieving global success in the music industry," and explained, "The vision of HYBE, aiming to be the world’s top entertainment lifestyle platform company, aligns with SM 3.0’s direction of becoming a fan- and shareholder-centered global entertainment company."

He continued, "HYBE has already successfully operated various labels with independent authority," and emphasized, "HYBE respects the legacy SM has built and values diversity in creativity. We will actively support unique content with its own identity to lead global trends by leveraging HYBE’s business model and network capabilities."

Park added, "The expansion of HYBE’s ‘Weverse’ and SM’s ‘Bubble,’ these two global platforms, will secure competitiveness worldwide beyond Korea," and said, "Let’s join forces to create the best company that stands shoulder to shoulder with the world’s top three major music companies."

Park also addressed SM’s current management, urging, "I hope that short-term decisions affecting business direction or rash judgments and actions by some executives do not cause ongoing confusion," repeating the sentiment for emphasis.

Former SM Chief Producer Lee Soo-man

Lee Soo-man - SM Legal Battle Intensifies

Although HYBE has become the largest shareholder, acquiring management rights is not guaranteed. SM has launched fierce attacks, accusing HYBE of hostile M&A. There have been multiple rounds of expos?s and critical statements exchanged. During this process, former Chief Producer Lee’s personal company CTP, established in Hong Kong, was mentioned amid offshore tax evasion allegations.

On this day, the legal battle between former Chief Producer Lee’s side and the current management also began. They fiercely contested the legality of SM’s issuance of new shares and convertible bonds that triggered the management dispute.

The SM management dispute escalated after the current SM management announced 'SM 3.0' earlier this month, which called for Lee’s resignation, and then held an emergency board meeting to resolve issuing new shares worth approximately 111.9 billion KRW and convertible bonds worth 115.2 billion KRW to Kakao via third-party allotment.

If this proceeds, Kakao will secure a 9.05% stake in SM, becoming the second-largest shareholder. This will dilute former Chief Producer Lee’s stake, which was 18.46% as of the previous day. In response, Lee filed an injunction to prohibit the issuance, claiming the third-party allotment of new shares and convertible bonds is illegal.

Lee’s legal representative argued at the first hearing, "Under the Commercial Act, new shares should primarily be allocated to existing shareholders, and third-party allotment is only exceptionally allowed," adding, "Third-party allotment intended to oust the largest shareholder or weaken control is illegal."

SM’s side countered that this issue is not a 'management dispute' but merely a 'difference of opinion on business judgment.'

SM’s legal representative emphasized, "Under an abnormal single-producer system, Lee Soo-man had long taken significant operating profits," and added, "To address these issues, a new strategy for intellectual property (IP) production was established, leading to the announcement of SM 3.0."

The court stated, "Lee’s side requested a prompt decision as March 6 is the payment deadline for the new shares approved by the SM board," and added, "We will decide after reviewing the additionally submitted materials."

This content was produced with the assistance of AI translation services.