HYBE Label is now the largest shareholder of SM Entertainment: its #1 rival and the most influential entertainment company in South Korea. However, previous claims that HYBE was the white knight in the SM Entertainment acquisition proved false, for HYBE finally revealed the hidden agenda behind their brave acquisition of SM Entertainment stocks. Check out the following brief explanation for the complete discussion about HYBE and SM Entertainment acquisition in simplified and easier terms.
Not A White Knight: HYBE Reveals Hidden Agenda Behind SM Entertainment Acquisition
When HYBE entered the SM Entertainment management dispute between Lee Soo Man and his nephew Lee Sung Soon and bought the largest shares of the company, everyone thought that Bang PD became the white knight who saved Lee Soo Man from getting ousted by his own founded company and nephew.
However, that was simply on the surface.
Dispatch and Etoday revealed that HYBE was definitely not Lee Soo Man’s white knight in the SM Entertainment acquisition. Instead, the move was inevitable for Lee Soo Man’s only way out as he had already been cornered with no other options.
According to the report, instead of becoming Lee Soo Man’s ally, HYBE decided to dominate SM Entertainment acquisition with a hidden agenda of reforming the company’s management system. And this agenda was revealed in HYBE official statement.
HIDDEN Agenda and Lee Soo Man’s Future: HYBE Official Statement
On February 10, HYBE released an additional statement, revealing and explaining their plans regarding SM Entertainment acquisition.
According to HYBE, it is not true that they are aligning themselves and partnering with Lee Soo Man. Instead, HYBE plans to fix the company’s management structure by resolving the corporate issue with their previous bold move in the SM Entertainment acquisition dispute.
Here are several vital points of HYBE’s official statement regarding their acquisition of SM Entertainment Lee Soo Man’s shares.
1. Lee Soo Man Can Only Work Outside South Korea for the Upcoming 3 Years
The first explanation from HYBE after acquiring Lee Soo Man’s shares in SM Entertainment is clarifying Lee Soo Man’s position in the company.
According to HYBE’s statement, Lee Soo Man will NOT return to SM Entertainment as a producer. In addition, the SM Entertainment founder is prohibited from having management rights in the company.
Instead, his deal with HYBE means that Lee Soo Man can only work as a producer outside South Korea for the next 3 years.
“Prohibition of competition and incentives.
For the upcoming 3 years, executive producer Lee Soo Man can only perform his production duties outside of South Korea. During this time, he will not be able to hire employees for SM Entertainment or sign contracts for artists.”HYBE.
2. Lee Soo Man Gave Up His Voting Rights to HYBE
Secondly, following HYBE acquisition of Lee Soo Man’s shares in SM Entertainment, Lee Soo Man has surrendered his voting rights for the company’s upcoming shareholder meeting.
Therefore, HYBE will appoint a designated director to perform the duty by submitting a proposal to the shareholder.
“Obligation to cooperate in various circumstances, including voting.
Lee Soo Man has delegated his voting rights to HYBE for SM Entertainment shareholder meeting in 2023. HYBE will assign a designated person as a director through a shareholder’s proposal.”HYBE.
3. Lee Soo Man Also Surrendered All His Shares to HYBE
Previously, Lee Soo Man held approximately 18.46% of SM Entertainment shares. As an attempt to resolve SM’s management dispute in SM Entertainment, he sold 14.8% of his shares to HYBE as a last resort. It means that today, he still holds around 3.66% shares of the company he founded.
However, this status may not hold for long. That is because HYBE revealed that the previous SM Entertainment acquisition move also meant that the company is eligible to buy all of Lee Soo Man’s remaining shares.
Lee Soo Man is giving up all his rights in SM Entertainment, and HYBE gladly accepts all his offers.
By selling all his remaining shares, Lee Soo Man will no longer have the means to claim and exercise his management rights in SM Entertainment.
“The right to acquire Lee Soo Man’s remaining shares.
HYBE has the right to acquire the remaining 868,948 shares of SM Entertainment stock that Lee Soo Man holds. The purchase claim can be exercised immediately after the approval of the acquisition of SM Entertainment by HYBE.”HYBE.
4. Lee Soo Man Will NOT Receive Any Royalties from SM Entertainment’s Businesses
Finally, to improve SM Entertainment’s management and corporate system, HYBE declared that Lee Soo Man would no longer receive any royalties from SM Entertainment businesses.
Previously, JoongAng revealed Lee Soo Man’s unfathomable ‘emperor’ contract that stated SM Entertainment will have to pay 6% royalties to Lee Soo Man from 2022 to 2092 from all music-related previously released album profits. Not only that, but Lee Soo Man will also receive additional 3% royalties from SM Entertainment’s management profits until the end of 2025.
It is a massive, controversial free ride, and Lee Soo Man was basically damaging the company with his 80 billion KRW (63.3 million USD) free profits for the next 70 years.
However, by selling his shares to HYBE, Lee Soo Man has decided to give up these rights. HYBE stated they had bought Lee Soo Man’s shares in Dream Maker Entertainment and SM Brand Marketing. Therefore, HYBE has also released SM Entertainment’s cost burden and eliminated the high royalty fee they previously had to pay to Lee Soo Man.
HYBE has blocked any possible leak of SM Entertainment’s money to Lee Soo Man.
“Obligation to buy and sell his shares in SM Entertainment-related companies.
Lee Soo Man has decided to sell all of his Dream Maker Entertainment and SM Brand Marketing shares to HYBE. Also, we have agreed that Lee Soo Man will not receive any more royalties.”HYBE.
HYBE Crushed Lee Soo Man in the Acquisition to Protect the History, Value, and Future of SM Entertainment
Finally, Dispatch revealed that HYBE had never intended to side with Lee Soo Man in the SM Entertainment acquisition.
Although Lee Soo Man is famous as the father of Kpop and founder of SM Entertainment, facts revealed that he’s been a parasite weighing down his own company. That is why the current management of SM Entertainment could not stand it. Lee Soo Man was gaining unfair profits, so the company’s management tried to eliminate his roles with the help of Align Partners.
Still, Lee Soo Man crushed SM Entertainment’s management plans by seeking help from HYBE, the company he had sworn never to sell before. As the last effort and grand exit from the company he founded, Lee Soo Man gained the last chance to control which company will hold the biggest control in SM Entertainment. And he chose HYBE.
At the same time, with SM Entertainment acquisition, HYBE stated their goal was never to retain Lee Soo Man’s control of the company. Instead, the deal was always about SM Entertainment’s history, value, and promising future.
“HYBE will always and forever be SM Entertainment’s competitor for the future of Kpop. However, regulating the company’s business management structure is a crucial prerequisite. After all, Kpop did originate from SM.”HYBE.
Bang Si Hyuk & Min Hee Jin Among HYBE’s Possible List of SM Entertainment Potential Future Directors
Finally, following the completed SM Entertainment acquisition process, HYBE has announced the possible candidates to lead SM Entertainment’s management.
Naver News reported on February 12 that SM Entertainment would conduct their regular shareholders’ meeting scheduled for the end of next month. During the meeting, the company will vote and appoint future directors to resolve the management dispute and restructure the company.
Furthermore, Hankyung revealed that among the HYBE speculated potential future director candidates for SM Entertainment are BTS father, Bang Si Hyuk, and ADOR NewJeans founder and former SM Entertainment producer Min Hee Jin.
The confirmed list of candidates will be available on February 17. But so far, nobody has seen the official list of HYBE’s candidates. Instead, the name of these two legends has only appeared as speculation regarding who HYBE or Lee Soo Man would propose as the big shots that would raise the value of SM Entertainment.
After all, SM Entertainment co-CEOs Lee Sung Soo and Tak Young Joon plan to propose Lee Chang Hwan (CEO of Align Partners) and Bae Jae Hyun (Senior Vice President and General Investment CEO of Kakao Group). So HYBE would have to counter with more powerful candidates.
According to Naver, HYBE is planning to secure management rights from the current SM Entertainment management by securing a total of 40% of the company’s shares using a tender offer. However, there has been no guarantee that HYBE will be able to ultimately win the vote.
A Final Showdown!
At last, HYBE’s grand influence in SM Entertainment acquisition have attracted all the attention of the Kpop industry and the general public. And everything will come to a final showdown at SM Entertainment’s shareholders’ meeting.
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