Hive Sends Letter to SM: "Must Cease Illegal Treasury Stock Acquisition"

[Asia Economy Reporter Yuri Choi] HYBE has urged SM Entertainment (SM) to immediately stop its planned treasury stock acquisition, claiming it is illegal.

On the 23rd, HYBE sent an official letter to SM's board of directors demanding the suspension of the treasury stock acquisition. This is because the act of acquiring treasury stock may constitute market manipulation strictly prohibited by the Capital Markets Act and criminal breach of fiduciary duty.

On the 22nd, SM acquired approximately 3 billion KRW worth of treasury stock. On the same day, it also reported to the Korea Exchange its intention to purchase an additional 3.8 billion KRW worth of treasury stock.

Regarding this, HYBE stated, "Despite the recent stock price exceeding 120,000 KRW, the act of purchasing treasury stock using a large amount of company funds cannot be seen as purely for the purpose of 'stock price support and enhancing shareholder value,'" adding, "We cannot help but suspect an intention to manipulate the market to obstruct HYBE's tender offer process."

According to HYBE, SM signed a trust contract with Shinhan Financial Investment in May for the acquisition of treasury stock worth 10 billion KRW to support the stock price and enhance shareholder value. However, when the stock price remained between 50,000 and 80,000 KRW, SM did not purchase treasury stock. It began acquiring treasury stock only after HYBE's tender offer process started this month.

HYBE also pointed out contradictions between SM's treasury stock purchases and its issuance of new shares and convertible bonds to Kakao. HYBE stated, "SM decided on the issuance of new shares and convertible bonds on the 7th, judging that a price around 90,000 KRW per share was appropriate," and added, "Shortly after, purchasing treasury stock at a price exceeding 120,000 KRW means either the new shares and convertible bonds were issued at a low price or the treasury stock was bought at a high price."

HYBE claimed that SM's treasury stock acquisition and the board resolution regarding it violate the Capital Markets Act. Article 176, Paragraph 2 of the Capital Markets Act prohibits trading or commissioning trades to induce stock price fluctuations. Furthermore, purchasing treasury stock at a high price without legitimate purpose or business necessity constitutes breach of fiduciary duty.

Meanwhile, HYBE has demanded that SM's board of directors disclose their stance on the request to suspend the treasury stock acquisition by the 27th.

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