Shares of two major South Korean K-pop companies dropped on Tuesday after reports emerged that industry leader Hybe is planning to sell a significant stake in SM Entertainment valued at $50 million.
Hybe, listed on the Kospi, experienced a decline of up to 2.4% in its stock value. Meanwhile, SM Entertainment, which trades on the Kosdaq, saw its shares decrease by as much as 5.74%.
According to South Korean media outlet Chosun Ilbo, Hybe—known for managing the globally popular boy band BTS—intends to sell 750,000 shares in a block deal. The report indicated that Hybe decided to sell because its stake was deemed a minority holding that did not grant it significant influence over SM Entertainment’s management. Hybe concluded that selling the stake in bulk would be a strategic move to realize profits.
The sale is expected to occur at a 4% to 5.5% discount to SM Entertainment’s last closing price of 95,800 South Korean won. This places the per-share sale price between 91,968 to 90,531 won, amounting to a total transaction value of approximately 68 billion won, or around $50 million. Prior to this sale, Hybe held a 12.45% stake in SM Entertainment.
This move comes after Hybe lost a takeover bid for SM Entertainment to South Korean social media giant Kakao, which now holds about 40% of SM. Additionally, Hybe is currently involved in a separate internal dispute with its sublabel ADOR, which manages the girl group NewJeans. Hybe shares have dropped 13.66% since April 19, the last trading day before Hybe initiated an audit into ADOR.
The audit has led to calls for the replacement of ADOR CEO Min Hee Jin, who faces accusations of attempting to make the sublabel independent. Hybe announced plans to address this issue at an extraordinary general meeting on May 31, as stated in an April 25 statement sent to CNBC. Min Hee Jin has denied the allegations and accused Hybe of replicating the concept of ADOR’s girl group, NewJeans, for another group under a different Hybe subsidiary.
