SM "If Hive's 'Block Deal Proposal' Is True, We Will Respond Strongly"

SM Entertainment (SM) recently announced a strong stance against rumors that HYBE is encouraging a block deal of SM shares and urged SM shareholders to be cautious.

On the 6th, SM stated, "HYBE conducted a tender offer to acquire 25.0% of SM shares but it effectively failed. Now, rumors are circulating in the market that HYBE is fervently trying to secure additional shares by encouraging some asset management firms to engage in a block deal of SM shares through friendly corporations."

According to the Capital Markets Act, if more than 10 persons acquire 5% or more of a listed company's issued shares through over-the-counter transactions within six months, they must acquire them only through a tender offer. In particular, although a block deal is a type of on-market purchase, it is considered an over-the-counter transaction when determining whether it is subject to a tender offer under the Capital Markets Act.

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The term "10 persons" includes not only those who actually traded but also all those who were "invited to trade." It also includes those who agreed to "acquire shares jointly or individually and then mutually transfer or receive the acquired shares."

Therefore, since HYBE invited 10 or more persons to subscribe for purchase and sale through a tender offer, HYBE cannot acquire SM shares through over-the-counter purchases or block deals within six months after the tender offer ends. If the block deal rumor is true, it corresponds to "HYBE inviting trading." At the same time, SM argued that it is highly likely a violation of the Capital Markets Act's mandatory tender offer obligation, as it would be considered an over-the-counter transaction through co-holders who "mutually transfer or receive the acquired shares" after acquiring the shares.

An SM official said, "We have received several reports that HYBE is attempting a block deal," and added, "If the rumor turns out to be true, we plan to respond strongly, including legal action, to minimize damage to SM shareholders."