HYBE Buys $78M in SM Entertainment Shares from Founder Lee Soo-man

K-pop giant HYBE purchased 868,948 shares of SM Entertainment, the company behind such acts as aespa and NCT 127, for approximately 104.3 billion won ($78 million) after SM founder Lee Soo-man exercised an option to sell the shares, HYBE announced in a Feb. 28 regulatory filing.

The purchase concludes a transaction that briefly created a power struggle in the fast-growing K-pop industry in South Korea. In October 2022, SM Entertainment canceled its production contract with Lee, the company’s founder. Lee sold HYBE the majority of his 15.8% stake in February 2023 and retained an option to sell his remaining shares to HYBE one year later. That purchase briefly made HYBE the leading shareholder in its competitor.

In March 2023, HYBE’s attempt to acquire a larger stake in SM Entertainment was later thwarted by Kakao, the Korean tech giant that owns K-pop record label Starship Entertainment as well as the South Korean music streaming app Melon and several media production companies. After Kakao’s successful tender offer upped its stake to 35%, HYBE relented and sold 44% of its SM Entertainment shares to Kakao later that month. In August, SM Entertainment and Kakao expanded their partnership by launching a North American joint venture.

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This latest sale doesn’t change the balance of power amongst SM Entertainment’s shareholders. Following the latest purchase, HYBE owns 2,967,759 shares, or 12.6% of outstanding SM Entertainment shares, up from 8.8% prior to the transaction. Kakao Corp and Kakao Entertainment remain SM Entertainment’s largest shareholders with stakes of 20.8% and 19.1%, respectively.

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