South Korean music label SM Entertainment has laid out all the reasons why it opposed the takeover of its competitor, HYBE.
In a video released on the label's YouTube channel on Monday, SM Entertainments's chief financial officer (CFO), Cheol Hyuk Jang explained their stance on HYBE's mergers and acquisitions (M&A).
"This is an attempt that ignores not only the fierce deliberation and efforts of the 600 SM employees who have dreamed of becoming the No. 1 entertainment company in the world but also the values and pride of SM that it has pursued together with the fans and artists," Cheol said.
On February 9, HYBE acquired 14.8 percent of the stock of SM, the largest stock owned by the largest stakeholder, executive producer Soo-Man Lee. This move made HYBE the ultimate large stakeholder in SM.
However, Hyuk Jang claimed this is a "hostile takeover attempt that has not been consulted with the current management and board."
He said 85 percent of the SM employees have expressed opposition to SM being absorbed by HYBE.
SM artists to be put on low priority
The SM CFO asserted that if HYBE takes over SM, their artists, employees, and stalkers will be led by such "weak governance."
Hyuk Jang argued that if the HYBE's plan continues, all SM artists will be given "lower priority" when having comebacks due to the limit of 100 music album releases per year.
"In addition, SM will give up the fan platform business aspired by SM 3.0 and use the HYBE platform. Such a platform will simply increase some licensing revenue but not be properly reflected in the corporate value," he added.
Decline in K-pop, concert price hike
Hyuk Jang also explained that HYBE's acquisition of SM "will undermine fair competition" and consequently lead to the decline of the K-pop industry.
"In the Korean entertainment market, the artists have put in their highest endeavors while the entertainment agencies have engaged in a constructive competition. This has enabled K-pop to achieve its current global popularity and fandom," he said.
"However, if HYBE takes the majority of the market share by acquiring SM’s managerial rights, K-pop would lose opportunities for a greater advancement forward," Hyuk Jang added.
Apart from this, the SM CFO pointed out that K-pop fans will also be affected by HYBE's monopoly, citing the ticket price hike as an example.
"HYBE is raising not only its own concert ticket prices but also those of the labels it has acquired, which illustrates the impact monopoly will have on the industry," he added.
Hyuk Jang further said that they will "continue to oppose hostile takeovers" and they will do their utmost best to "protect shareholder rights by establishing a sound and transparent governance structure."
HYBE is the powerhouse behind top Korean stars BTS, NewJeans, Seventeen, ENHYPEN, Tomorrow X Together, NewJeans, and Le Sserafim.
SM Entertainment is the home of international K-pop acts such as TVXQ, EXO, Super Junior, SHINee, Girls' Generation, Red Velvet, NCT, WayV, and Aespa.
