“Hive, what if you accept the tender offer”… SM Entertainment Minority Shareholders ‘Insecure’

input2023.03.15 17:46
correction2023.03.16 01:38

Hive owns 15% stake in SM Entertainment
When participating in purchases, the amount of ant arms decreases

▶Market Insight, March 15, 2:05 p.m.

Whether or not Hive will respond to Kakao’s tender offer for SM Entertainment by the 26th has emerged as a matter of keen interest among minority shareholders. Kakao plans to purchase shares in proportion if the number of shares submitted exceeds 35% of the planned number of purchases. If Hive, which holds a 15.78% stake, participates in the tender offer, the amount that minority shareholders can sell will inevitably be reduced by that much.

On the 15th, shares of SM Entertainment closed at 113,400 won per share, down 1.56% from the previous day. Compared to the highest price of 161,200 won taken on the 8th, it fell by 29.7%. Hive’s share price plummeted last weekend after announcing that it would give up its management rights to SM Entertainment. The market believes that the reason for the larger-than-expected drop is the uncertainty about the direction of Hive’s stake.

Hive has not given a clear answer on how it will handle its stake. Chairman Bang Si-hyeok of Hive attended the Kwanhun Forum held at the Press Center in Taepyeong-ro, Seoul that day and said, “All the people in charge are on vacation.”

Considering only the practical benefits of both Hive and Kakao, it is reasonable for Hive to participate in the tender offer. Hive can sell about 5% of the 15% stake of former general producer Lee Soo-man, which it bought at 120,000 won per share, at 150,000 won per share. 25% profit in a month or so. There are also observations that the tender offer will be used to avoid the short-term trading profit return system. According to the Capital Markets Act, if a major shareholder disposes of a stake within six months after acquiring it, the gains from the sale must be returned to the company that acquired the stake. However, an exception is made when participating in a tender offer.

If Kakao is also going to buy back its stake in Hive anyway, it is helpful to reduce the overall acquisition cost by partially digesting it through this tender offer.

However, the prevailing view is that Hive will not sell its shares until it takes away opportunities from minority shareholders. Because he may face reputational risk. As an alternative, the possibility of handing over stocks to Kakao in a block deal is raised.

Reporter Lee Dong-hoon [email protected]

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