SM Entertainment Offices Raided by Korean Regulators as K-Pop Agency Duel Continues
The battle for corporate dominance of K-Pop has become a drama that never stops giving.
After the acrimonious takeover battle between BTS-backer Hybe Corp. and tech giant Kakao for control of SM Entertainment, Korea’s financial regulators are probing the deal-making that eventually led to Kakao’s victory.
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Korea’s Financial Supervisory Service raided the offices of SM Entertainment on Tuesday, according to the Yonhap news agency. Investigators were looking for evidence of stock price manipulation between February and March when the two camps were skirmishing.
Earlier this month, the FSS raided Kakao and its Kakao Entertainment subsidiary, following a petition by Hybe.
Hybe bought a 14.8% stake in SM Entertainment, the agency behind K-pop acts including EXO, Aespa and NCT, from its founder Lee Soo-man. But SM Entertainment’s management opposed the move from a rival agency and sought support from Kakao.
In a defensive move, SM Entertainment announced that it would issue stock and convertible shares to Kakao. That was blocked by a court injunction. Hybe sought to buy more SM Entertainment shares on the open market through an open offer to existing shareholders. But, enriched by funds from Saudi Arabia, Kakao hit back with a higher priced offer for 40% of the company’s stock – a move that emerged as the knockout blow.
Despite the ongoing war of attrition, there are signs of some kind of new normal emerging.
On Monday, Hybe’s “fandom life platform” Weverse announced that 12 solo and group artists from SM Entertainment will join the platform and open their own respective official communities by September 2023, shifting them from SM Entertainment’s existing fan community platform Kwangya Club.
Cooperating with Weverse was part of the settlement agreed by SM Entertainment, Kakao and Hybe when Hybe agreed to accept Kakao’s higher-value stock offer. The unit, partly responsible for the reach of BTS, spans fan chats and multimedia content, a commerce platform where fans can purchase albums and artist related official merchandise. Hybe says that Weverse is now available in 245 countries and regions and has approximately 65 million subscribers.
Hybe has also enjoyed a significant stock rally since the truce. Its shares have climbed by 37% to KRW251,000 apiece in the last month. Korean financial media report that institutional and overseas investors have been net buyers of the stock.
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