SM stock price rises to 127,900 KRW
Surpasses public purchase price after 3 trading days
[Asia Economy Reporter Lee Jung-yoon] SM Entertainment (SM) stock price rose, surpassing HYBE's tender offer price of 120,000 KRW during trading on the 15th, leaving the acquisition battle in uncertainty.
At around 10 a.m. that day, SM surpassed 120,000 KRW and rose to 127,900 KRW. As of 2:54 p.m., it was recorded at 120,900 KRW, up 3.51% from the previous trading day.
Since HYBE began its tender offer on the 10th of last month, the stock price exceeded the tender offer price within three trading days, causing setbacks in the tender offer plan. Minority shareholders have no incentive to sell to HYBE at 120,000 KRW, which is lower than the market price. Earlier, Align Partners Asset Management, which raised governance issues, pointed out that HYBE's tender offer price of 120,000 KRW per share was low.
Align believes that if SM implements the new producing system 'SM 3.0,' corporate value can be expected to increase, and the tender offer scale should be expanded to include all shares held by general investors.
Since the price offered by the buyer in a tender offer is inevitably exposed first, if market participants form a mood of not accepting the purchase price, it becomes a burden.
As Align's public opinion campaign seems to be gaining traction, there is speculation that HYBE might raise the purchase price and push for another tender offer. Considering that about 40% of shares are generally needed to secure stable management rights, the approximately 19% stake held by major shareholder Lee Soo-man alone may face difficulties in management. However, HYBE currently maintains its existing policy.
With SM's stock price soaring and red lights flashing on HYBE's plan to secure shares, the acquisition battle, which seemed to be in HYBE's favor, is returning to square one.
Excluding major shareholder Lee Soo-man (18.78%), who has already agreed to transfer his shares to HYBE, it is known that the National Pension Service (8.96%), Com2uS (4.2%), KB Asset Management (3.83%), and Align (1.1%) currently hold large amounts of SM shares.
Kakao, which is set to secure a 9.05% stake through new shares and convertible bonds, has drawn a line on acquiring additional shares.
However, in the securities industry, there is speculation that "Kakao will contact institutional investors to secure additional shares." Even if Kakao wins the injunction filed by major shareholder Lee Soo-man to prohibit the issuance of new shares and convertible bonds and secures about 9% of shares, if it does not become the largest shareholder, it would only be an investment of about 200 billion KRW in HYBE.
Since May 2021, whenever acquisition rumors surfaced, Kakao has publicly stated, "No specific decisions have been made."
Some speculate that Kakao might purchase additional SM shares through a counter-tender offer or other means, transfer those shares to its subsidiary Kakao Entertainment, and then Kakao Entertainment might attempt a backdoor listing. There is also a possibility that Kakao might give up on entering the acquisition battle altogether and wait for other entertainment company M&A opportunities.
Additionally, the market is highly focused on whether the National Pension Service, which holds about 9% of shares, will participate in HYBE's ongoing tender offer.
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