HYBE Shares Additional Statement Clarifying How Lee Soo Man Will Not Return To SM Entertainment
HYBE has shared an additional statement clarifying some ideas that were misunderstood regarding their acquisition of Lee Soo Man‘s SM Entertainment shares.
In an additional statement shared with various media outlets including Etoday, HYBE shared an additional statement clarifying some points that many people were confused about when they announced that they were acquiring the majority of Lee Soo Man’s SM Entertainment shares.
There are various misunderstandings regarding the press release we distributed earlier this morning of February 10. We would like to clarify a few points through this explanation.
The content below refers to the stock purchase agreement between HYBE and former executive producer Lee Soo Man. We would like to explain some of the points that are misunderstood.
1. (Prohibition of competition and incentives) For the next three years, executive producer Lee Soo Man will only be allowed to perform his production duties outside of Korea. During this time, he is unable to hire employees for SM Entertainment or sign contracts for artists.
Explanation: It is not true that Lee Soo Man will be allowed to have management rights or will be returning to SM Entertainment as a producer. He is allowed to perform his production duties overseas for the next three years. The provisions of the stock transfer between Lee Soo Man and HYBE limits the number of shares that Lee Soo Man holds.
2. (Obligation to cooperate in situations such as voting) Lee Soo Man has delegated his voting rights to HYBE during SM Entertainment’s 2023 shareholders’ meeting. Through a shareholders’ proposal, HYBE will designate a person as a director.
Explanation: It is not true that SM Entertainment can intervene in personnel management decisions or exercise management rights because they are obligated to delegate their voting rights during the shareholders’ meeting. They are also obligated to cooperate in the appointment of a director.
3. (The right to acquire the remaining shares of Lee Soo Man) HYBE holds the right to claim the remaining 868,948 shares of SM Entertainment stock that Lee Soo Man holds. The purchase claim can be exercised immediately after the approval of the acquisition of SM Entertainment by HYBE.
Explanation: Through this acquisition, it was not possible to buy all of the shares from the minority shareholders because acquiring the major shareholders’ shares would be subject to a notice of business combination report. Therefore, the contract for acquisition was signed using the largest number of shares available for transfer by the major shareholder, Lee Soo Man. After securing a sufficient number of shares, the combination of HYBE and SM Entertainment was approved and after that, we will purchase the remaining shares from Lee Soo Man. The contract was created in a way where this claim can be put into practice. Therefore, there should be no speculation that Lee Soo Man’s remaining shares that he currently holds are held for reasons such as exercising management rights.
4. (Obligation to buy and sell his stake in companies related to SM Entertainment) Lee Soo Man has decided to sell all of his stake of Dream Maker Entertainment and SM Brand Marketing to HYBE. In addition, we have decided that Lee Soo Man will not receive anymore royalties.
Explanation: As we have already explained in the press release, this part of the agreement was made between HYBE and Lee Soo Man to improve the corporate structure of SM Entertainment. By acquiring Lee Soo Man’s stakes in his affiliate companies and removing the royalties that he would receive, we have eliminated SM Entertainment’s cost burden and solved most of the corporate issues between SM Entertainment and Lee Soo Man.
Therefore, there is groundless speculation that Lee Soo Man will retain control of certain management areas within SM Entertainment or work on production in the company. In addition, we have definitely resolved the corporate issues within SM Entertainment through this acquisition.
HYBE acquired 14.8% of SM Entertainment’s stock, all from Lee Soo Man’s personal shares, making them the highest stakeholder in the company. This move came days after Kakao acquired 9.05% of SM Entertainment’s stock. Lee Soo Man expressed his disapproval of Kakao’s acquisition and threatened to sue the very company he founded. Dispatch later shared that Lee Soo Man had no other choice except to sell his shares to HYBE.
Dispatch Reveals Lee Soo Man Selling His SM Entertainment Shares To HYBE Was His Only Option Left