PT Entertainment
HYBE has come a long way since its founding in 2005 as Big Hit Music, with BTS as its only artist. As the company expanded alongside BTS’s success, it made Big Hit a subsidiary label and began acquiring other Korean labels like Pledis Entertainment and Source Music, as well as American companies like Scooter Braun’s Ithaca Holdings and Quality Control. HYBE is now looking to acquire a majority stake in SM Entertainment, the South Korean entertainment company founded in 1995 by record producer Lee Soo-man.
HYBE’s efforts to acquire SM Entertainment have been met with some controversy, as other companies like CJ Group and Korean tech giant Kakao have also expressed interest in buying Lee’s shares. On Feb. 7, Yonhap News Agency reported Kakao had become SM Entertainment’s second biggest shareholding by buying a 9.05 percent stake in the company. This caused a dispute between SM Entertainment and Lee, who threatened to sue his own company for apparently using illegal business practices by creating new shares without first offering them to existing shareholders. Days later, on Feb. 9, Variety reported Lee struck his own deal with HYBE. As part of their agreement, HYBE would purchase a 14.8 percent stake in SM Entertainment and replace Lee as the company’s largest shareholder. HYBE’s founder Bang Si-hyuk and Lee said they struck the deal because of their “shared vision” for the future of K-pop.
However, SM Entertainment’s CFO Jang Cheol-hyuk released a YouTube video on Feb. 19 expressing the company’s opposition to HYBE taking over. Jang believes that HYBE joining forces with SM Entertainment would create a monopoly in the K-Pop music market, which could lead to a lack of “diversity” within the industry, as well as an increase in ticket prices and other goods.
On March 6, HYBE’s goal of acquiring a majority of SM Entertainment drew one step closer when the Seoul Eastern District Court announced that it had sided with Lee and granted a provisionary injunction that would block SM Entertainment from issuing new shares to Kakao. This meant that the previous deal SM Entertainment had made with Kakao to become the company’s second-biggest shareholder would not go through. HYBE has since acquired another 0.98 percent stake in SM Entertainment through a tender offer, raising its total stake in the company to 15.78 percent. On March 7, Kakao made a tender offer to secure an additional 35% stake in SM Entertainment after HYBE’s tender offer failed. Meanwhile, HYBE has submitted a petition to the Korean Financial Supervisory Service requesting an investigation into the unusual surge in SM’s stock price that led to their tender offer failing, believing it to have been a product of stock price manipulation on SM’s part.
It looks like this battle for control of SM is a real-life “Game of Thrones.” It remains to be seen whether HYBE will be successful in acquiring a majority stake in SM Entertainment and what the implications of such an acquisition would be for both companies and the K-Pop industry as a whole.
