HYBE outright confirmed Lee Soo Man is not allowed to be directly involved with the production or business at SM Entertainment 

HYBE sought to clarify misunderstandings in the press release earlier today (Feb. 10).

Prohibition of competition and incitement

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According to the contract, Lee Soo Man can only carry out his production activities outside of Korea in three years. At the same time, Lee Soo Man cannot hire staff from SM Entertainment or sign contract with artists from SM Entertainment in the next three years. 

⇒ Explanation: That Lee Soo Man continues his management or returns to SM Entertainment as a producer are groundless rumors, because he can only do his production activities overseas in the next three years. The shares Lee holds is also limited by this agreement. 

Cooperation obligations such as voting authorization

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Lee Soo Man has decided to authorize the voting rights to HYBE at the regular shareholder meeting in 2023 of SM Entertainment. In addition, through the proposal of shareholders, we have decided to cooperate actively in appointing 1 person appointed by HYBE as director.

⇒ Explanation: Since there is an obligation to delegate voting at the regular shareholder meeting in 2023, there exists an obligation to cooperate in appointing a director overseeing personnel of company. That HYBE has the authority to exercise management rights or interfere in the personnel affairs of SM Entertainment is not true.

Right to request purchase of the remaining shares

This contract holds the right to buy the remaining shares (868,948 shares of SM Entertainment). The right to purchase can be exercised as soon as the business consolidation between HYBE and SM Entertainment is approved.

⇒ Explanation: In this transaction, a concurrent public tender for minority shareholders’ shares is not possible, as the acquisition of all shares by the largest shareholder would be subject to legal notice about the business consolidation first. Accordingly, It is required to sign a contract to buy and sell the maximum number of shares that can be purchased from the largest shareholder, and publicly buy shares of minority shareholders, ensure enough shares, as well as conduct approval of the business combination, only then will Lee Soo Man sign the contract that allows the exercise of the right to claim the remaining shares.

Therefore, it is unfounded to speculate that these overall remaining shares are being held for other purposes, such as exercising management rights.

Obligation to buy and sell shares in related companies of SM and settle trading relationships

Lee Soo Man decided to sell all shares of Dream Maker and SM Making Brand owned by him and related parties to HYBE. In addition, we have decided not to accept any remaining royalties.


⇒ Explanation: As explained in the press release, this is part of the agreement between us (HYBE) and Mr. Lee in order to improve SM Entertainment’s governance structure. We have decided to arrange personal shares of SM Entertainment and its subsidiaries by purchasing shares of related companies under the general director. By removing the portion of royalties that were raised through mutual agreement, we have removed SM Entertainment’s cost burden. With this agreement, HYBE has resolved most of the dominance structure issues between Lee Soo Man and SM Entertainment.

In conclusion, whether Lee Soo Man will retain the management rights or still produce content at SM Entertainment is baseless speculation. In addition, HYBE has definitely solved the problem of improving SM Entertainment’s governance structure through the share purchase and stock exchange contract.

Source: FB, twt 

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