SM "Management Change and Kakao Sale Rumors Are Groundless"

SM Entertainment has dismissed rumors about Kakao's potential sale and changes in SM's management.

On the 5th, SM stated in a press release, "According to our communication with Kakao, Kakao is not considering any management changes," adding, "We continue to pursue joint growth and maintain close business cooperation to create mutual synergy with Kakao, Kakao Entertainment, and others even at this moment."

Regarding the investigation by Kakao's audit committee, SM explained, "Since early December 2023, Kakao has requested a large volume of documents from us related to the preparation of Kakao's consolidated financial statements. This included requests for PC forensic analysis of key executives." They added, "There were considerable questions and regrets about the scope and methods of these requests. We have cooperated to the fullest extent to facilitate accurate understanding."

SM also addressed the background and expected effects of the recent controversies surrounding the acquisitions of The Hub and TenX. In the past, before the launch of the SM 3.0 system, CTGA (Culture Technology Group Asia), a 100% personal company of former executive producer Lee Soo-man, had been signing publishing contracts with writers worldwide. After Lee's departure, KMR was established. However, concerns were raised that KMR might have spent excessive amounts on acquiring the music publishing company The Hub and TenX, which includes singer Kim Woo-jin.

In response, SM explained, "The acquisition price of The Hub was determined using the 'Market Approach' evaluation method applied to publishing companies (NPS: Net Publisher’s Share - net sales after deducting writer royalties multiplied by a multiple). This was an appropriate level considering commonly traded cases and the growth trend over the past three years."

Regarding TenX, SM stated, "As part of the multi-label strategy under SM 3.0, this investment was made in a business engaged in artist and content production. Kim Woo-jin is a former SM trainee and has been active as a member of Stray Kids." They added, "KMR decided on the acquisition (business transfer) of TenX at an appropriate level through a DCF (Discounted Cash Flow) evaluation method, based on the judgment that artist Kim Woo-jin has sufficient growth potential."

Furthermore, SM said, "Through the acquisition of TenX, KMR not only obtained a label that nurtures various artists including Kim Woo-jin but also plans to link its production capabilities with the publishing business to promote various domestic and international producing service businesses."

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