[Click eStock] "Tencent Becomes SM's Third-Largest Shareholder... Expansion in Chinese Market Expected"

HYBE Sells Entire Stake in SM Entertainment to Tencent Music Entertainment
Business Collaboration Between SM and TME Expected to Strengthen
SM's Expansion in China Anticipated After Stake Sale
Weverse Partnership to Continue for SM Artists Despite Shareholder Change
Potential Benefits for SM if Chinese Market Opens Further

With HYBE selling its stake in SM Entertainment to China's Tencent Music Entertainment (TME), SM's business in China is expected to gain momentum.

On May 28, Choi Minha, a researcher at Samsung Securities, stated, "With TME becoming the third-largest shareholder of SM, following Kakao and Kakao Entertainment, collaboration between TME and SM is expected to strengthen."

Previously, HYBE announced that as of May 30, it would sell all 2.21 million shares it holds in SM (for a total of 243.3 billion KRW) to TME. HYBE became an SM shareholder in February 2023 by acquiring the stake of former SM chief producer Lee Sooman, but with this sale, the shareholder relationship will be concluded.

HYBE had initially agreed to a 'platform collaboration' with Kakao after halting its attempt to acquire management control of SM, and since September 2023, artists under SM have sequentially joined HYBE's fan platform Weverse. Even after this stake sale, SM artists are expected to continue using Weverse in accordance with the existing contract.

With this transaction, SM is likely to further expand its business in China in various areas such as albums, music distribution, merchandise, and exhibitions in partnership with TME. Choi explained, "TME has already been collaborating with domestic entertainment companies through music distribution and other initiatives. In addition, the Tencent Group is a shareholder in Kakao Entertainment and YG Entertainment through its subsidiaries. By becoming a shareholder of SM through this stake acquisition, TME and SM are expected to strengthen their mutual collaboration."

TME is also expanding its collaboration with Korean entertainment companies in the local market, reflecting the popularity of K-pop. In its recent earnings announcement, TME mentioned offline events for artists such as aespa. Last month, TME's QQ Music collaborated with SM to host a pop-up store for Mark (NCT) in mainland China. SM's subsidiary DearU signed a strategic partnership with TME in October last year and is preparing to launch the Bubble service in China.

Choi added, "With rising expectations for a possible easing of the Korean Wave restrictions (Hallyu ban), if the Chinese market opens up, SM could benefit even more directly. The SM shares held by HYBE have been considered potential overhang, but this sale removes that uncertainty, which is also positive."

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