In the battle of the K-pop giants in the latest installment, HYBE, home BTSThere have been some changes in SM Entertainment’s business partnership with technology company Kakao, which owns popular messaging app Kakao M and music streaming service Melon.
On February 6, Kakao announced that it would acquire a 9.05% stake in SM Entertainment, whose list includes NCT 127 and red velvet. Three days later, HYBE announced that it would get Acquired a 14.8% stake in SM Entertainment by purchasing a majority stake in the company founder and legendary K-pop producer, Li Xiuman. following activist investor campaign In order to reduce Lee Jae-yong’s role, SM Entertainment canceled his producer contract on December 31, 2022.
SM Entertainment known as HYBE’s investment was a “hostile takeover” and said the partnership with Kakao was the “first step” in its long-term transformation plan. HYBE believes that SM Entertainment’s relationship with Kakao is one-sided and not good for shareholders.
“The award of the contract between SM and Kakao to acquire the convertible bonds harmed shareholders,” HYBE said in a statement on Friday (Feb. 24). A clause grants Kakao or Kakao Entertainment the ability to “continuously increase its stake in SM” by allocating shares issued through a paid-in capital increase to third parties, HYBE said. “This will dilute the value of the shares held by all shareholders other than Kakao or Kakao Entertainment.”
HYBE further argued that the contract would harm SM Entertainment’s chances of attracting “new strategic investors” and make it easier for Kakao to “seize the management rights of SM”.
HYBE also disputed Kakao’s role in managing SM Entertainment artists and distributing their music, arguing that the contract gave Kakao “never-expiring exclusive” rights to distribute SM Entertainment’s recorded music, and allowed Kakao Entertainment to manage SM Entertainment in North and South America. Entertainment artist.
In turn, SM Entertainment’s subsidiary, SM Life Design, will produce records for Kakao Entertainment artists and provide locations for music video shoots. “Compared to the significant management rights handed over by SM,” HYBE said, “the rewards seem ridiculously small.”
After reviewing the legal aspects of the contract, HYBE “will take all necessary civil and criminal legal measures,” it said.