Kakao's Sudden Halt in Acquiring SM Shares... Court Grants Injunction

Hive Gains Advantage in SM Acquisition Battle

The court ruled in favor of former executive producer Lee Soo-man in a provisional injunction request aimed at blocking Kakao's paid-in capital increase and convertible bond issuance.

The Seoul Eastern District Court Civil Division 21 (Chief Judge Kim Yoo-sung) issued a ruling on the afternoon of the 3rd to grant the injunction requested by Lee Soo-man against SM for the prohibition of new shares and convertible bond issuance.

SM's management held an emergency board meeting on the 7th of last month and resolved to issue approximately 111.9 billion KRW worth of new shares and 105.2 billion KRW worth of convertible bonds to Kakao through a third-party allotment. Through this, Kakao was set to secure about 9.05% of the shares, rising to become the second-largest shareholder.

On the other hand, Lee Soo-man, who held an 18.46% stake at the time and was the largest shareholder, faced an unavoidable decline in his shareholding ratio.

In response, former producer Lee Soo-man filed a provisional injunction with the court.

Lee Soo-man's side argued, "When issuing new shares and convertible bonds to a third party who is not an existing shareholder, it must be necessary to achieve business objectives, and the method chosen must minimize infringement on shareholders' preemptive rights to the extent necessary to achieve those objectives. However, the resolution to issue new shares and convertible bonds this time is an illegal resolution that fails to meet both of these requirements."

[Image source=Yonhap News]

The court's acceptance of the injunction appears to have accepted Lee Soo-man's claims.

As a result, Kakao's acquisition of a 9.05% stake in SM has been abruptly halted. HYBE, through this court decision, has significantly distanced itself from Kakao in the SM acquisition race in terms of shareholding, gaining a favorable position.

A HYBE official stated, "We have been informed of the injunction acceptance result and are currently reviewing the details. We will provide further information once the specifics are confirmed."