court-SM Entertainment
Court blocks SM Entertainment's planned share sale to Kakao
By Kim Han-joo
SEOUL, March 3 (Yonhap) -- A Seoul court on Friday blocked K-pop agency SM Entertainment Co.'s planned issuance of new shares and convertible bonds to an entertainment arm of tech giant Kakao Corp.
The Seoul Eastern District Court accepted an injunction filed by SM's estranged founder Lee Soo-man, barring Kakao Entertainment's deal to become the second-largest shareholder.
The court did not give details for the ruling.
Hybe, the K-pop powerhouse behind global superstar BTS, earlier became the largest shareholder of its industry rival SM Entertainment on Feb. 22 by acquiring a 14.8 percent stake from Lee, who had an 18.46 percent share.
Hybe seeks to further buy a 25 percent stake from other shareholders to ultimately build a 40 percent stake by the annual shareholders meeting slated for March 31.
In response, SM Entertainment's board led by Lee's nephew struck the deal with Kakao Entertainment to issue new shares through a third-party allotment.
The deal, if closed, would allow Kakao to have a 9.05 percent stake in SM Entertainment and become the second-largest shareholder.
Lee's lawyers have claimed the issuance of new shares and convertible bonds should be carried out for management purposes and should not hurt ordinary shareholders by undermining the value of their assets.
SM Entertainment, meanwhile, said Lee had colluded with industry rival Hybe through a share purchase agreement for personal benefit.
Lee is considered a K-pop pioneer who has masterminded various artists dating back to the early 2000s. Before BTS became a global superstar, SM Entertainment was one of the country's top three K-pop agencies, with big-name K-pop acts, like EXO, Red Velvet and NCT, under its belt.
SM and Hybe accounted for about 70 percent of the domestic music revenue and 89 percent in the performance market in the third quarter of 2022, according to SM.
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