Exclusive Report Rings The Alarm On HYBE’s Questionable Acquisition Of Scooter Braun’s Ithaca Holdings

HYBE chairman Bang Si Hyuk is facing serious allegations over his acquisition of Ithaca Holdings, a US-based entertainment company, in 2021.

An exclusive report by Newtamsa has recently raised concerns about the acquisition, as it highlighted several irregularities in the process.

Major asset sold before acquisition

HYBE acquired Ithaca in 2021 for ₩1.20 billion KRW (about $816,000 USD). However, reports claim that in November 2020, Ithaca sold the master rights to Taylor Swift’s first through sixth albums for 300 million USD (around [krw] 360 billion). These rights were among Ithaca’s most important assets. This sale reportedly earned Ithaca around [krw] 200 billion [/krw] in profits.

The fate of the [krw] 200 billion is, however, unclear. Typically, an increase in short-term profits results in a corresponding increase in total equity. However, Ithaca’s total equity fell from [krw] 270 billion [/krw] to ₩190 billion KRW (about $129 million USD), indicating a capital deficit despite a capital stock of ₩240 billion KRW (about $163 million USD). HYBE CFO Lee Kyung Joon reportedly said that he didn’t remember the figures and did not understand the situation, despite having overseen a transaction exceeding [krw] 1 trillion.

HYBE Vice President of Communications, Park Tae Hee, later explained that half of the profit from selling Swift’s masters was spent on repaying the Big Machine Label Group (BMLG) acquisition debt, and the remaining half (around [krw] 170 billion [/krw]) went to shareholder dividends. Essentially, existing shareholders, including Scooter Braun, took the proceeds from the sale of core assets before transferring the company “shell” to HYBE.

According to M&A experts, selling key assets immediately before an acquisition and distributing the proceeds as dividends is highly irregular. In such cases, the purchase price should reflect the company’s reduced asset base. Yet, HYBE reportedly paid a ₩900 billion KRW (about $612 million USD) premium on the acquisition.

Confusing explanation about master rights

Park Tae Hee reportedly described the sale of Swift’s master rights as “just the catalog business, which is like a photo book,” confusing the master rights with a non-core asset. Later, he acknowledged that the catalog included the master recordings but insisted the transaction was completed before HYBE’s acquisition and therefore unrelated to the company. His statement did little to address the question raised by M&A experts. In addition, his initial confusion revealed that the VP of Public Relations of an entertainment giant like HYBE was utterly unaware of the very concept of master rights, raising eyebrows.

Hurried deal and significant resignations

Just four days prior to HYBE announcing its Ithaca acquisition on April 2, 2021, two external directors resigned simultaneously, despite having two years remaining in their contracts. This has raised questions about whether they were trying to avoid liability for a deal gone wrong. Park, however, claimed that their resignations were due to personal reasons, without divulging any further details.

The acquisition itself was completed very swiftly, in just two months. Although the legal advisors involved celebrated it as a success, critics question whether HYBE had accurately assessed the related risks, including Swift’s masters sale and Scooter Braun’s conflicts with his major artists, such as Ariana Grande and Justin Bieber.

Post-acquisition losses, unchanged goodwill

After the acquisition, Ithaca’s financial performance has caused concerns. It was in ₩7.90 billion KRW (about $5.37 million USD) deficit in the first half of 2021, followed by ₩69.0 billion KRW (about $46.9 million USD) in 2022, ₩142 billion KRW (about $96.8 million USD) in 2023, and ₩140 billion KRW (about $95.2 million USD) in 2024. The total accumulated losses over four years now exceed ₩400 billion KRW (about $272 million USD). Yet, the company’s initial [krw] 900 billion goodwill (extra value a company pays when buying another company above its net asset value, usually for brand, reputation, or customer relationships) still stands at around [krw] 860 billion [/krw].

Under normal circumstances, when losses are incurred after an acquisition, goodwill gets written down. HYBE, however, justified maintaining goodwill based on projected operating profit margins, which it has consistently predicted at over 30% annually.

Scooter Braun retained as CEO

Ithaca’s founder, Scooter Braun, has had multiple conflicts with artists such as Taylor Swift, Justin Bieber, and Ariana Grande, all of whom eventually cut ties with him. Questions are now being raised about why HYBE retained him as CEO after the acquisition, delaying his removal till 2024. By this time, the relationship with key artists had already been damaged.

Did Bang Si Hyuk personally benefit from the deal?

At the time of acquisition, Ithaca’s shareholders and creditors were reportedly paid a ₩1 KRW (about $0.00 USD) capital increase. HYBE stated that none of its executives, including Bang Si Hyuk, were among the creditors. However, it’s unclear whether Bang or other associates held shares. If they had, experts warn it could constitute a mechanism to move domestic funds overseas by inflating company value. Bang Si Hyuk is already under investigation for allegedly obtaining ₩400 billion KRW (about $272 million USD) in illicit gains during HYBE’s 2020 listing.

What has further fueled the controversy is Bang’s alleged refusal to answer these questions. Newtamsa reportedly sent him direct questions regarding the issues with this acquisition. Though he read the messages, he reportedly deleted the questions instead of responding.

Park Tae Hee later implied that HYBE could take legal action against those raising questions. HYBE’s overall denial of transparency has only strengthened the speculations.