A letter was leaked by an insider from SM Entertainment, which contained HYBE and SM's exchanges on artists' prioritization.
Why is it a big deal?
Will HYBE Overshadow SM's Artists? Leaked Letter Revealed by Insider
On March 1, a letter was leaked online by an insider from SM Entertainment. According to Korean news outlets, SM Entertainment sent the leaked letter to shareholders ahead of their scheduled meeting.
On the letter's exterior, the captions of "an independent Board for all shareholders and not specific shareholders" and "divided of 1,200 won per share" were written.
In the letter's bottom left, it displayed the header "SM Board Recommendation," which was circled. On the contrary, the caption of "former major shareholder Lee Soo-Man's proposal" was marked out in an "X" sign.
With the insider's disclosure, the letter also wrote:
"The shareholder meeting this 2023 was the last chance to fully address SM's management disputes, which have persisted for the past decade."
"It was also the final opportunity to increase corporate value as a company with many talented artists in Korea."
A separate Q&A document was also pinned by SM, for the purpose of persuading shareholders. The exchanges involved asking SM Entertainment if the merge with HYBE is a good thing.
To their reply, SM responded there is no other choice than to accept HYBE's priorities, which is to focus on the artists on their affiliated labels. The conversation also mentioned the artists associated under HYBE, including the labels housing them.
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See the transcription below:
Question: "Isn't it advantageous if HYBE, a major company in the same sector, acquires SM?"
SM: "Well, we'll have no other option but to accept their first priorities, which are the associated labels under them like BigHit Music (BTS), ADOR (NewJeans), Source Music (LE SSERAFIM), and PLEDIS Entertainment (SEVENTEEN)."
"Their artists will receive the best songs, performances, dance routines, comebacks, and trainees."
The document also explained that if HYBE were to hold 40 percent of SM shares and its 60 percent with general shareholders, conflicts of interest will arise between SM and HYBE shareholders as competitors.
SM also elaborated why they encourage Kakao's paid-in capital increase via convertible bonds issuance at 90,000 KRW. They have also resisted HYBE's tender offer of 120,000 KRW.
"We can anticipate synergies because of the paid-in capital increase and bond issuance by Kakao. This is for strategic collaborations with the company."
"There are no management rights and almost no overlaps between our business areas and our company because the entire issuance size is under 9 percent."
How Did The Community React To This?
The online community's reaction towards SM's responses were mostly negative. They mostly criticized SM Entertainment for their approach, and even considered the letter as media play.
Here are their comments below:
"SM is such sore loser with this pathetic media play. Did they only learn dirty things from Kakao."
"They really think other agencies operate through fist fights like they do."
"This is seriously making me think they know nothing about managing a huge agency. So, what were they planning to do with 'SM 3.0' exactly?"
"SM's management level is seriously s**t tier."
"Is this director a choding who only made it through elementary?"
What's your take on this matter? Share your thoughts on the comments below!
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