HYBE has grown tremendously over the past few years. The South Korean entertainment company, which was founded in 2005 as the only record label known as Big Hit Music, has been around for a long time. Their only artist was BTS, but as the company expanded with the success of BTS, Big Hit became a subsidiary and began acquiring other Korean record labels such as Pledis Entertainment, Source Music, and also acquiring the company. Americans like Scooter Braun’s Ithaca Holdings and, most recently, a hip-hop label. Quality control. Despite already dominating many music markets, HYBE is still not growing.
As of August 2021, HYBE has also been eyeing SM Entertainment. However, the attempt to acquire a majority stake in the company has been met with controversy.
Why does HYBE want to buy a majority stake in SM Entertainment?
SM Entertainment Founded in 1995 by music producer Lee Soo-man, it has been one of Korea’s largest entertainment companies for decades. It is responsible for helping popularize K-pop around the world with early groups such as Girls’ Generation, Super Junior, and Shinee, as well as new acts such as ECO, NCT, Red Velvet, SuperM, and Aespa. It makes sense that HYBE would want to join forces with SM Entertainment. to make himself a more powerful force in the K-pop industry.
HYBE’s plan to acquire SM Entertainment It comes after news that Lee, the company’s founder and largest shareholder, is planning to sell his shares to a major company in order to further expand SM’s reach. Lee, but so are other companies, including CJ Group and Korean tech giant Kakao.
Was HYBE successful in acquiring a majority stake in SM Entertainment?
On February 7, news outlet Yonhap reported that Kakao had become SM Entertainment’s second-largest shareholder by purchasing a 9.05 percent stake in the company. This caused a dispute between SM Entertainment and Lee, who threatened to sue his own company for apparently using illegal business practices by creating new shares without first offering them to existing shareholders. to overcome management disputes The following day on February 9, Variety reported that Lee had agreed with HYBE himself. As part of the deal, HYBE would purchase a 14.8 percent stake in SM Entertainment and replace Lee as the company’s largest shareholder, Bang Si-. HYBE founder hyuk and Lee said they made the deal because “Have a shared vision” for the future of K-pop. “HYBE fully agrees with former chief producer Lee’s strategic initiatives, including a metaverse, multi-label system, and a sustainable vision campaign,” Si-hyuk said in a statement. “Using our talents and resources, HYBE will strengthen K-pop’s presence on the global stage.” According to the Los Angeles Times, HYBE is planning to acquire up to 40 percent of SM Entertainment.
As of March 6th, HYBE’s goal of acquiring a majority of SM Entertainment’s operations was revealed. It came a step closer when the Seoul Eastern District Court declared Lee’s side and granted a temporary injunction to block SM Entertainment. By issuing new shares for Kakao, this means that the previous agreement that SM Entertainment made with Kakao to become the company’s second-largest shareholder will not pass. The court explained that the decision was made because the deal was made without the consent of shareholders.
SM Entertainment How to respond to HYBE participation?
While Lee thinks HYBE’s takeover of SM Entertainment is the best for the company’s growth, but SM Entertainment’s CFO, Jang Cheol-hyuk It published a YouTube video on Feb. 19 revealing that the company overall disagreed with the move. Jang believes that HYBE’s collaboration with SM Entertainment will create a monopoly in the K-Pop music market. According to US News, a monopoly is “a market where one business acts as the only supplier of goods or services.” Basically, this means that if HYBE takes over SM Entertainment, HYBE will be seen. Jang said that this would have a negative effect on K-pop because there would be a lack of “diversity” in the industry as most of the artists would be owned by HYBE, as this could lead to less competition. Jang said HYBE’s acquisition of SM Entertainment could lead to a lack of innovation in K-pop, as well as an increase in ticket prices and other merchandise.
On the other hand, it’s important to note that while HYBE, SM, YG, and JYP are some of the biggest companies in the K-Pop industry, they are not the only ones. There are CUBE, Starship, Jellyfish, RBW, and other record labels. There are countless others that make up the industry and represent many well-known K-Pop groups HYBE and SM. The combination will undoubtedly make an impact. But it doesn’t always mean that it creates a monopoly.
HYBE’s majority stake in SM Entertainment Will it affect the artists of SM?
Zhang believed that HYBE’s takeover would also have a negative impact on SM’s artists. Therefore, SM artists will have no choice but to be demoted,” he said.
Despite SM Entertainment’s claims, Si-hyuk told CNN in an interview on March 5 that HYBE is not trying to “dominate” the entire K-pop industry. Buying these companies is increasing the popularity of K-pop around the world. Latin and Afrobeat music is growing rapidly. So where we are It is therefore urgent to increase the number of exposures.”
In order to do this, Si-hyuk said he encouraged the company’s smaller labels to maintain their “independence”, contrary to Jang’s point that the acquisition would result in a lack of diversity. Independently working under their labels, from Pledis Entertainment’s SEVENTEEN to ADOR’s NewJeans.
So what will happen next?
Since HYBE’s reported goal is to buy up to 40 percent of SM Entertainment’s shares (according to the Los Angeles Times), it appears to be continuing to look for opportunities to further expand within the company. But that won’t be the case if there’s no back-and-forth communication.
According to Reuters on March 6, HYBE has acquired another 0.98 percent stake in SM Entertainment. through tender offer This increased their total stake in the company to 15.78 percent. While their initial offer was intended to gain an additional 25 percent stake in the company, it was dropped as SM’s stock price soared.
On March 7, Kakao made an offer to secure an additional 35% stake in SM Entertainment after HYBE made an unsuccessful offer. Meanwhile, as reported by the Korean Herald at the end of February, HYBE filed a petition with the Korean Financial Regulatory Authority requesting an investigation into SM’s unusually high stock price. This led to their failed bid. believed to be a product of manipulation of the stock price in the part of SM
It looks like this battle for control of SM will be “real-life Game of Thrones”.
Image Source: Getty/ Han Myung-Gu