'Lee Soo-man Absence' Risk... SM Alone Declines Amid KOSDAQ Rebound

Soo-man Lee's Contract Termination Announcement Sparks Brief Rise
Concerns Over Producing Competitiveness Weakening Upon Actual Contract End

Align Weakens After Demand for Accounting Records Disclosure

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] On the 4th, while the KOSPI index rebounded by more than 2%, SM is the only stock falling. On this day, activist fund Align Partners Asset Management demanded the disclosure of SM's meeting minutes and accounting books, drawing attention to the background of the stock price decline.

SM, which started the day up 0.99%, turned to a decline during the session and was trading at 69,000 won, down 2.40% (1,800 won) compared to the previous trading day as of 11:07 a.m.

SM's stock price surged sharply in the short term after news broke last month that the largest shareholder, Executive Producer Lee Soo-man's personal business, Like Planning, had been notified of an early termination of their contract. Immediately after the announcement, on the 16th of last month, SM's stock price surged more than 20% intraday and reached 80,000 won on the 22nd of last month.

However, the stock price has since declined. While the KOSDAQ index plunged amid concerns of a global economic recession due to U.S. monetary tightening and even the possibility of a fiscal crisis in the U.K., analysis suggests that worries about the split with Producer Lee Soo-man potentially weakening SM's producing competitiveness have been reflected.

In fact, Taeyong, leader of the multinational boy group NCT127, publicly expressed concern at a press conference commemorating the release of their 4th full album "2 Baddies" last month, saying, "I cannot imagine SM without Mr. Lee Soo-man," and "I hope this album is not Mr. Lee Soo-man's last producing work."

Debuted in 2016, NCT is a boy group without nationality or member number restrictions, with each album surpassing 2 million copies sold, and notably recorded over 10 million album sales last year. NCT was created under the producing of Executive Producer Lee Soo-man. Since founding SM in 1995, Executive Producer Lee has created 'megastars' including HOT, SES, TVXQ, Super Junior, Girls' Generation, SHINee, and EXO, and SM has grown into a company with annual sales of 700 billion won. SM emphasized that this is because Executive Producer Lee Soo-man comprehensively participated in production, considering their concepts, music, worldview, and the company's direction.

Earlier, Align Partners sent an open shareholder letter to SM in August, demanding the termination of the service contract and royalty payments between SM and Like Planning, arguing that these acts damage shareholder value. In response, SM announced on the 15th of last month that it would immediately disclose if the early termination of the contract was confirmed through a board resolution.

In a statement on this day, Align Partners said, "We believe that SM's board of directors will sign an agreement to terminate the producing contract with Like Planning early," but pointed out, "Nevertheless, there is still uncertainty regarding the exact timing and specific details of the confirmed disclosure."

They added, "From today, we request to inspect and copy the board meeting minutes and accounting books as the first step of the phased shareholder rights protection measures that have been reserved so far," and said, "This inspection and copying request includes not only the board meeting minutes and books related to transactions with Like Planning but also materials related to transactions with affiliated companies invested in by major shareholders and related parties, which have been raised as issues through media reports." The deadline for response is the 18th.