RelatedSM hopes to more than double its 2022 revenue of 850 billion won to 1.8 trillion won by 2025 through a mix of partnerships and acquisitions, which include acquiring a U.S. management company and, by the second half of 2024, launching its first U.S.-based artist.
A HYBE acquisition of a controlling interest in SM could potentially face regulatory scrutiny from South Korea’s Fair Trade Commission since it exceeds 15% of SM’s stock ownership. In 2022, HYBE was behind 26.8% of albums sold in Korea, while SM was behind 19.1%, according to Korea chart company Circle Chart.Though few had predicted such a dramatic unraveling, SM was overdue for a transformation.
SM’s shares have been chronically undervalued, industry observers say, due to an arrangement where the company paid producing fees to a separate entity owned by Lee. SM paid Lee 24 billion won in 2021, equivalent to more than a quarter of SM’s operating profit that year. Even in years when SM produced a loss, Lee took home a sizable paycheck.
South Korean stocks are often undervalued, analysts say, since some companies can seem to be managed for the benefit of founders and families to the detriment of general shareholders. Still, in the HYBE-SM power struggle, SM shareholders appear to have won either way: The March 7 share price of 149,700 won is up over 116% since SM announced it would terminate Lee’s contract on Oct. 14.The 70-year-old Lee, who founded SM in 1995, has been credited with making K-pop what it is today.
, which he watched during his master’s degree studies in California in the 1980s, he paved the way for K-pop to win overseas fans with a signature formula of visually striking performance and dance pop.
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