After HYBE bought an additional stake in SM Entertainment, the label will now have a 12.6% stake in the company home to EXO, aespa, and more.
On February 28, HYBE, home to BTS, NewJeans, and SEVENTEEN announced that it will acquire an additional stake in SM Entertainment.
This is following its initial transfer agreement with its founder Lee Soo Man, where Bang Si Hyuk acquired a 14.8% stake from SM's major shareholder at the time.
HYBE Bang Si Hyuk Becomes Shareholder of 12.6% Stake in SM Entertainment
On this day, HYBE, the biggest label among "Big 4" entertainment agencies, confirmed that it will acquire an additional 868,948 shares (3.68%) of SM shares for 78M USD (104.273 billion won) on March 7.
The acquisition price per share is 120,000 won (90 USD/share), which is 51% higher than the closing price of 79,500 won (60 USD/share) on February 28, the day of its acquisition announcement.
According to HYBE, the purpose of acquiring the additional share was "to acquire shares following the exercise of put options (share purchase rights) by SM founder Lee Soo Man."
In particular, in February last year, HYBE signed an equity transfer agreement with Lee Soo Man, when it initially had a competition against Kakao to acquire SM Entertainment.
While Kakao won the battle, HYBE was able to acquire a 14.8% stake in Lee Soo Man's share who was a major shareholder at the time and bought it at $90/share, or a total of 316.6M USD (422.8 billion won). Lee also granted Bang the right to put options for the remaining stake and the exercise price of the put option was the same as its initial price per share.
HYBE has allowed the company to exercise the put option within one month from the time the business combination with SM was approved by the Fair Trade Commission or one year from the closing date of the founder's stock trading transaction.
With HYBE's additional stake, the company now owns a 12.6% stake in SM Entertainment.
Experts Predict HYBE to Experience Loss After Acquisition of Additional Stake in SM
Following the news, concerns arose for HYBE as they predict that SM shares are likely to fall in the future.
On February 27, when Karina of aespa admitted to dating actor Lee Jae Wook, SM's stock price fell to around 70,000 won ($52.4).
In addition to this, SM's earnings also slowed down. The label's sales in the fourth quarter of 2023 were only 250 billion won (187M USD), down 3 percent year-on-year.
Its operating profit plunged 52% to 10.9 billion won ($8M) as well, far below the market forecast (30.3 billion won or $22.6M), not to mention that its operating profit fell 14% to 20.6 billion won ($15.4M), too.
READ MORE : Will SM Entertainment 'Disappear' Once HYBE Becomes Largest Shareholder?— Here's What We Know
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Written by Eunice Dawson.
