HYBE Dumps $50 Million in SM Entertainment Shares, Stock Tumbles

HYBE dumps SM Entertainment stock
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HYBE dumps SM Entertainment stock
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Photo Credit: HYBE Corporation

HYBE has dumped 755,522 shares of SM Entertainment in an after-hours block deal, according to a disclosure filed Tuesday. HYBE sold 25.46% of its holdings in SM Entertainment, causing the stock to drop.

SM Entertainment stock closed with a 5.32% decrease compared to the previous day. HYBE sold the shares at $66.63 per share, with its total holdings in SM Entertainment now amounting to 2.21 million shares. HYBE initially held around 2.96 million shares of SM Entertainment, a minority stake of 12.45% with no management rights.

The move comes after HYBE acquired 14.8% of shares from SM Entertainment Founder Lee Soo-man in February 2023. That move was part of HYBE vs. Kakao over the management of SM Entertainment. HYBE has decided to capitalize on the recent rally of SM Entertainment shares, which have increased 20% over the last month.

The growth in South Korean entertainment stocks can be attributed to expectations of China loosening content restrictions for Korean content. The Chinese government allowed a Korean indie band to perform in Beijing in July 2023. The last time that happened was in 2015, when YG Entertainment’s BigBang held a concert in China.

“There is likely to be some overhang risk associated with HYBE’s remaining stake in SM Entertainment as some investors have concerns about HYBE selling additional shares in the next several years,” says Douglas Kim, an analyst at Smartkarma, a Singaporean investment research firm.

“We believe that SM Entertainment has a more well-diversified line-up of artists and bands relative to other companies that are more reliant on one or two bands for their business. SM has been outperforming other major competitors this year, and we expect this outperformance to continue this year.”

The total transaction value of the sale of shares equals about 68 billion won ($49.6M) and reduces HYBE’s stake in SM Entertainment from 12.45% down to just 9.37%. HYBE shares have dropped 13.66% since April 19 as the label engages in a dispute with its sub-label ADOR—manager of the K-pop girl group NewJeans.

HYBE is expected to replace ADOR CEO Min Hee Jin amid rumors that she wants to take ADOR independent. HYBE has called on Min to step down, though she has denied the allegations. She accuses HYBE of copying the concept of ADOR’s NewJeans for another girl group managed under a different subsidiary.