Kakao and HYBE are on the rise following news that they have halted their competition to acquire SM Entertainment (SM) and reached an agreement. This is interpreted as the possibility of a 'winner's curse' caused by an excessive public tender offer competition disappearing.
As of 9:11 a.m. on the 13th, Kakao is trading at 62,000 won, up 6.71% from the previous trading day. HYBE is also trading at 183,800 won, up 5.50%.
On the previous day, HYBE announced that it would suspend the SM acquisition process. HYBE stated, "The competition intensified due to additional public tender offers by Kakao and Kakao Entertainment, and even the stock market showed signs of overheating, leading us to judge that the price we would have to offer for the SM acquisition exceeded a reasonable range."
The reason HYBE did not respond aggressively is interpreted as considering the 'winner's curse.' Previously, HYBE expressed its intention to make a public tender offer at 120,000 won per SM share but failed. Soon after, Kakao raised its tender offer price to 150,000 won, causing SM's stock price to surge, approaching 160,000 won.
As concerns from the market and investors grew, Kakao ultimately shifted towards becoming the largest shareholder, while HYBE pivoted to securing practical benefits through platform-related collaboration.
The two companies are expected to announce follow-up plans after further confirming △ Kakao's acquisition of SM shares held by HYBE △ platform-related consultation agreements.
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