SM Entertainment Spoiled in Response to Dispute
Concerns over the departure of artists who are about to renew their contracts
tens of billions invested in defending management rights
EXO, NCT, etc. Contract Expires Soon
Some big agencies send love calls.
In the process of a dispute between Kakao, Hive, and Alignment Partners over SM Entertainment's management rights, SM Entertainment's inside is festering. Tens of billions of won was spent on responding to the dispute, leaving the storeroom empty and concerns over the departure of members, including their artists, also grew. There are concerns that prolonged disputes will significantly reduce the company's competitiveness.
According to the investment banking (IB) industry on the 1st, SM Entertainment's current management, which defined Hive's acquisition attempt as 'hostile merger and acquisition (M&A), is estimated to have spent tens of billions of won on defense of management rights. First of all, it is known that about 2.5 billion won was invested in hiring Boston Consulting Group (BCG), a strategic consulting company. Six voting rights delegation agencies were also hired to secure voting rights from friendly shareholders. Considering that it usually employs one or two companies, it is unprecedentedly large. It is observed that at least 1 billion won to 2 billion won will be paid to these companies alone.
Executives and employees are also being mobilized to collect voting rights. He visits an institution that will act as a "casting boat" and asks for the current management's support when exercising voting rights. Key executives, including CEO Lee Sung-soo, are holding NDRs in Hong Kong and Singapore to meet and persuade foreign investors.
SM Entertainment also announced plans to buy and incinerate shares worth 63.5 billion won during Hive's tender purchase period. The market interpreted it as a move to induce a rise in stock prices and make it difficult for Hive to make a public purchase. There was also a happening in which Hive immediately sent an official letter to the securities company to block the process of purchasing treasury stocks.
In a chaotic situation where it is impossible to predict, a large number of artists are about to renew their contracts. Most of SM Entertainment's artists, including Kangta, BoA, TVXQ (Choi Chang-min, U-Know Yunho), Super Junior, Girls' Generation (Taeyeon, Yoona, Yuri, Hyoyeon, Sunny), SHINee, EXO, Red Velvet, NCT, SuperM, and aespa, are known to expire between this year and next year. Some large agencies are reportedly contacting artists whose contracts are about to expire and sending love calls.
The bigger problem is that ordinary shareholders, including institutional investors, want a "long-term dispute" to maximize profits. "Investors also agree that disputes should be settled as soon as possible to enhance long-term corporate value," a fund manager said. "The dilemma of the capital market is that it may be a reasonable choice to continue confusion regardless of the company's competitiveness to boost stock prices in the short term."