Another twist came in the fight between The biggest K-pop music label.
South Korean financial regulators raided K-pop agency SM Entertainment for this suspected involvement to manipulate stock prices in February. At the time, the labels Hybe and Kakao Entertainment were jockeying to acquire the powerhouse music label.
On Tuesday (April 18), South Korea’s The Financial Supervisory Service (FSS) is looking for SM’s headquarters in Seongsu District, Seoul and seized stock data amid the ongoing investigation, according to Korea JoongAng Daily.
Authorities launched an investigation into SM in February following a petition by Hybe, the label behind global sensation BTS. Flagged by Hybe a great trade of the SM shares it allegedly sold artificial raising the value of the company’s stock and cause of its tender offer to fail.
At the time, Hybe and Kakao were competing to get the majority stake in SM Entertainment. Hybe’s bid of 120,000 won (about $90) per share ultimately failed because it fell below SM’s stock value on the last day of the offer period.
In March, it shows that the acquisition fight came to an amicable conclusion when Taking bow, States the market is “overheating.” Kakao walked away with the prize, claiming a 40% stake in SM afterwards buy some in Hybe’s parts. Hybe still holds an 8.8% stake.
It is not sure if Kakao can hold on to their victory. The FSS also raided its offices on April 6 as part of ongoing investigation.
“Any illegality, if proven, will be held accountable to the maximum extent possible within the permissible legal and institutional scope,” FSS governor Lee Bok-hyun said at a meeting in March, saying quoted by Pulse News Korea.
The messy, internal power struggle at SM Entertainment
The external battle to take over SM Entertainment was fueled by an internal power struggle within the company. One reported fight centered on Lee Soo Man, the founder of SM Entertainment and was called “godfather” of K-pop, and former co-CEO Lee Sung Soo, his estranged nephew.
The turmoil in the company’s battle surfaced in October, when it was announced that Lee Soo Man’s contract as chief producer. should have been terminated a year earlier than expected.
In early February, then-Co-CEOs Lee Sung Soo and Tak Young-jun announced a new direction for the company called “SM 3.0” through a video published on YouTube.
“Lee’s contract with SM as chief producer has ended, but we really appreciate his support as a shareholder,” Sung Soo said the videoclearly signaling to his uncle that he would no longer be part of the company’s future vision.
The fight between Lee Soo Man and Lee Sung Soo
The tension escalated on February 9, when Kakao announced that this was it acquire a 9.05% stake of SM, became the second largest shareholder—a decision that surpassed Lee Soo Man, at the time the company’s largest shareholder. In retaliation, Lee Soo Man sued SM, citing the board violation of business laws.
The next day, Hybe announced that it had purchased a 14.8% stake of SM from Lee Soo Man, a move SM CFO Jang Cheol-hyuk called “counter takeover.” Then, Lee Sung Soo published a bombshell video on February 16 accusing his uncle tax avoidance through a company based in Hong Kong. Lee Soo Man, who was named in the Pandora Papers for tax evasion, responded in his own video to his nephew’s claims, expressed, “He is a good nephew who grew up in a family with his father who is a pastor. My heart hurts.”
Amidst the chaos, even the Korea Entertainment Producers Association joined in with its own statement on February 20, reprimanding SM management for “destroying the Hallyu legacy” (“hallyu” meaning the rise in global popularity of Korean culture) and expressed its support for industry veteran Lee Soo Man.
What’s on the cards for Kakao and SM Entertainment?
The proxy fight between uncle and nephew has cooled since earlier this year. Lee Sung Soo and his co-CEO descends on March 31, the day of SM’s general board meeting, amid a wider turnover of top management. Jang Cheol-hyuk, former CFO of SM, now CEO.
“Today marks the end of an era for SM Entertainment, named after me,” said Lee Soo Man in a statement on the day of the leadership shake-up. He still retains a 3% stake in SM. Meanwhile, Lee Sung Soo returns as the company’s C-suite executive, Kpop everything reports.
The investigation into the alleged involvement of Kakao and SM in market manipulation is still ongoing. Hybe, though losing the takeover battle, recently announced SM artists will join their social media platform, Weverse.
Related stories
👀 Regulators are watching as BTS label Hybe tries to consolidate its control over K-pop
⛔ A fan boycott forces a Kpop label to reconsider its album release plans
🎤 The future of K-pop superstars BTS is at the center of the conscription debate in South Korea