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"Bang Si-hyuk and Min Hee-jin as directors of SM Entertainment? Stock price fluctuates ahead of vote"
SM Entertainment's Voting Rights War...Investors laugh.
Outline of this week's board of directors ahead of SM's shareholders' meeting
Hive will likely put up Bang Si-hyuk and Min Hee-jin as candidates for director.
Current management seeks second term, aligns with Kakao
HYBE, which bought a majority stake in former SM Entertainment executive producer Lee Soo-man, will confirm a candidate for director who will lead SM Entertainment's new management this week. The move is aimed at contesting the appointment of directors with the current management and Kakao Solidarity, which declared "unavoidable SM" at the regular shareholders' meeting of SM Entertainment scheduled for the end of next month. In other words, a "prelude" to the SM Entertainment management war will be held.
HYBE is expected to put forward 'Big Shot' as a candidate for SM Entertainment's director. Candidates include Bang Si-hyuk, chairman of the Hive board who raised BTS (BTS), and Min Hee-jin, CEO of Adore, who raised the girl group New Jin's as a global artist. The direction of management control depends on the votes of shareholders. Stock prices of SM Entertainment are also expected to fluctuate ahead of the vote.
Outline of HYBE's board candidates this week.
According to the investment banking (IB) industry on the 12th, HYBE will submit a list of new SM Entertainment board candidates to the company through shareholder proposals by the 17th. Under the current law, shareholder proposals must be submitted six weeks before last year's shareholders' meeting. Hive has no shareholder proposition. This is because only shareholders had the right to propose at this shareholders' meeting as of this shareholders' meeting. For this reason, former general manager Lee will take the form of submitting candidates for directors on behalf of HYBE.
The term of office of the current four SM Entertainment board members will end at the same time next month. Co-CEOs Lee Sung-soo and Tak Young-joon, who rebelled against former general manager Lee Soo-man, decided to raise Lee Chang-hwan, CEO of Alignment Partners, as other non-executive directors while pushing for a second term in partnership with Kakao and Alignment Partners. Bae Jae-hyun, senior vice president of Kakao, who is an ally, is also mentioned as a candidate for a part-time director.
Hive plans to prevent the current SM Entertainment management from appointing directors and secure management rights. Although it plans to secure 40% of its total stake (including 14.8% of former general manager Lee's stake) through a tender purchase, it cannot guarantee a victory in the voting. This is because only shareholders can exercise their voting rights at this shareholders' meeting as of the end of last year even if they increase their holdings through a tender purchase.
Many observers say that HYBE will nominate Chairman Bang and CEO Min as candidates for SM Entertainment's directors to win shareholder votes. CEO Min joined SM Entertainment as a new employee in 2002 and planned the concept of SM Entertainment's representative artists such as Girls' Generation, SHINee, F(x), EXO, and Red Velvet. After leaving SM Entertainment in 2018, he joined HYBE as Chief Brand Officer (CBO). New Jin's is a new girl group that was created in 2021 as CEO of ADOR, a subsidiary of HYBE.
All-in to win shareholders' votes
If HYBE takes control of SM Entertainment's board of directors at this shareholders' meeting, the war will virtually end. On the other hand, even if a stake of more than 40% is secured through a tender purchase, if a director fails to be appointed at this shareholders' meeting, he may not be able to exercise management rights. In this case, a temporary shareholders' meeting must be held to dismiss the existing registered director. Analysts say that it is not easy in reality to pass a special resolution that obtains the consent of more than two-thirds of the participating shareholders.
The industry expects a fierce battle to secure voting rights to acquire management rights of SM Entertainment. When the announcement of the convocation of the shareholders' meeting is announced, the two sides will start recommending delegation of voting rights from early next month. An official from the IB industry said, "The fact that the current management has drawn a line with founder Lee Soo-man and has been supported by institutional investors and foreigners will be a big burden for HYBE," adding, "We will preemptively use 'Big Shot' to increase SM Entertainment's corporate value."
Existing shareholders will have a "flower party." Until the 6th of next month, when HYBE's tender offer ends, SM Entertainment's stock price is expected to show a stable trend around 120,000 won, the tender offer price. After the tender offer, stock prices are expected to dance depending on whether the two sides announce measures to boost corporate value and shareholder rights. The stock price of SM Entertainment (stock name SM) jumped 16.45% to close at KRW 114,700 on the 10th.
Source: Korean Economy
