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A Seoul court on Friday struck down a proposed move to issue new shares Hallyu talent agency SM Entertainment South Korean tech giant Kakao and its subsidiary Kakao Entertainment.
Lee Soo-man, one of the pioneers of South Korea’s contemporary music scene but recently at the center of a storm of controversy, is seeking an injunction.
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Lee, who has fallen out with the company’s current management team, announced in early February that he planned to sell a 14.8 percent stake in SM to seashell., the company behind the popular group BTS and rival of SM.
Then it was reported that SM management planned to issue new shares to the Kakao couple, allowing them to hold 9.05% of the shares and sign an exclusive distribution contract. The stake would make Kakao the company’s second-largest shareholder after HYBE and reduce its influence.
HYBE said recently it has paid its first tranche of shares And it wants to buy Lee’s remaining 3.6 percent stake. It will also open to all shareholders for a 25% stake in the company.
The Seoul Eastern District Court on Friday accepted Lee’s application for an injunction to issue and sell shares to Kakao. But it did not announce why.
However, a letter from the law firm Yang & Yang that Lawyer Li saw typeread: “The court did not accept that SM had an urgent need for financing. Furthermore, SM also held that at the stage of the strategic alliance with Kakao only to formulate a business strategy, SM could not disregard the right of first refusal to issue new shares and convertible bonds to Kakao. Fund raising of approximately KRW 217 billion. Rights of existing shareholders. [..] Resolutions such as the issuance of new shares by the current management of SM seem to be aimed at weakening the control of the largest shareholder. “
The letter also warned of further legal action if existing management tried to reassign control by other means.
SM’s current management accused Lee of engaging in illegal financial activities and of collaborating with Hybe against his own company.
Last month, some 208 employees signed an open letter outlining Li’s activities as illegal. “As soon as former chief producer Lee Soo-man faced the danger of his illegal tax evasion being exposed, he sold his shares to a rival company he had spoken ill of and fled,” they said.
both centerSecond and SM launched a campaign to win over other minority shareholders ahead of an investor meeting at the end of March.
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