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In Win for HYBE, Korean Court Blocks SM Entertainment Bid to Issue New Shares

todayMarch 3, 2023

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TOKYO — A court ruling in South Korea on Friday added further confusion to K-pop’s biggest corporate shakeup in years: the rollercoaster battle for control over SM Entertainment, the once-industry leader bedeviled by corporate governance concerns, which rival HYBE is eager to take control of.

The Seoul Eastern District Court granted a provisionary injunction to block SM from issuing new shares, which Kakao, a Korean tech giant, had agreed to buy as part of a partnership deal between the two companies. The court ruled that SM’s decision was taken without shareholders’ consent, accepting the argument from SM founder Lee Soo Man, who has been battling SM’s management over the future of the company he created in 1995.


The ruling marks a win for HYBE, K-pop’s largest agency and home to boy band BTS, which in recent weeks acquired a 14.8% stake of SM shares from Lee – and announced plans to take control and overhaul SM’s management and board of directors. HYBE was offering shareholders a premium to boost its stake up to 40%, but the market price has since exceeded the offer price. SM’s management has slammed HYBE’s acquisition as a “hostile takeover.”

Following the ruling, HYBE, in a statement, thanked the court for the “appropriate” ruling. “With this result, everything should now fall back into place,” the company said. 

In a statement from his lawyers, Lee said the decision “clearly confirmed that the resolution by SM’s current management to issue new shares and convertible bonds was made in an unlawful attempt to influence the company’s control and governance.” The attorneys added that “if SM’s current management further attempts to commit unlawful acts in the future, we will respond firmly by taking appropriate legal actions.”

A Kakao spokesperson said late Friday that the company didn’t immediately have a comment but “plans to issue a response after internal discussions.” A SM spokesperson couldn’t immediately be reached.


Lee and the company he founded are widely considered trailblazers, developing K-pop’s signature formula of visually driven performances and dance pop, and tirelessly knocking on overseas markets’ doors. But in recent years SM’s output has slowed, which its management has blamed on the founder-led single-pipeline structure. 

SM’s co-CEO Lee Sung-su, a nephew of the founder’s late wife, has lashed out at the uncle with a litany of accusations, from using artists’ music for personal gains to tax evasion through a Hong Kong-based paper company. Shareholders in recent years have also objected to the founder’s ballooning producer fees, which he was receiving via a separate entity he owned.

Kakao in February agreed with SM’s management to buy 9.05% of SM shares, as part of a wider partnership agreement. The messenger-app-and-search-engine company, which has successfully expanded into e-finance and music, was going to distribute SM’s music and related content on its platforms. Kakao has also acquired several entertainment agencies in recent years, leading some, including HYBE, to argue Kakao was trying to gain managerial control over SM. Both SM executives and Kakao have rejected the claim.

With an annual shareholders meeting scheduled for March 31, SM and HYBE are expected to spend the coming weeks courting SM investors, which includes South Korea’s National Pension Service.

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New Around the World: Grupo Frontera Adds ‘Di Que Si’ to Global Charts

No song debuts in the top 50 of the March 4-dated Billboard Global 200 or Billboard Global Excl. U.S. charts, but that doesn’t mean there aren’t significant new entries. Grupo Frontera, the regional Mexican group with a fast-growing roster of global hits, arrives on both rankings with “Di Que Si,” alongside Grupo Marca Registrada. The new duet hits the Global 200 at No. 152 and the Global Excl. U.S. chart […]

todayMarch 3, 2023

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