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Kakao secures controlling stake in SM Entertainment, but Hybe left with half its stock

By | Published on Wednesday 29 March 2023

SM Entertainment

South Korean internet firm Kakao has got itself the 40% controlling stake it wanted in K-pop powerhouse SM Entertainment. So well done Kakao. We’ll be sending you a celebratory cake in the post.

The original plan, of course, was for SM to issue some new shares for Kakao to buy. But SM founder Lee Soo-man blocked that proposal through the courts. And then persuaded that other K-pop powerhouse Hybe to start buying up existing SM shares in a bid to take control of his company. As part of that arrangement, Lee himself sold most of his SM shares to Hybe.

But then Kakao announced that it too was now buying up existing SM shares, offering a higher price than Hybe. Not wishing to get into a price war, Hybe quickly bailed on its share buying plan. Then last week it announced that it would sell all the shares it previously bought, mainly from Lee, to Kakao, seemingly keen to benefit from the premium price being offered by its rival.

However, in the end Kakao only needed just under half of Hybe’s SM shares to get the 40% (technically 39.9%) that it needed. So Hybe still owns 8.8% of SM Entertainment. And with Kakao’s premium priced share purchase offer now over, and the SM share price subsequently slipping as a result, Hybe’s stock is currently worth less than it paid for it.

But still, I’m sure with its Kakao alliance the reinvigorated SM will be super successful and the value of those shares can only go up, up, up.