Hybe to keep tender offer for SM Entertainment at $92 per share

[Courtesy of SM Entertainment]

Hybe Co., a label behind K-pop superstar BTS, has no plans to raise the stock price of SM Entertainment Co. for the tender offer although shares of the entertainment giant are on a rise amid continued management feud.

According to Korea Exchange on Sunday, SM Entertainment’s margin loan balance increased by 87.7 billion won ($67.7 million) in February as of Friday, marking the largest gain among Kosdaq-listed companies.

The margin balance rose to 148.6 billion won on Friday, up from 40 billion in January before the announcement of Kakao Corp.’s acquisition of SM Entertainment shares and convertible bonds. The balance jumped 144.16 percent during the period.

The increase in margin loans came on growing expectations that the price of SM Entertainment shares will rise further should the ongoing management dispute continue.

Shares of SM Entertainment surged 14.7 percent in January from 76,700 won at the end of December. The price gained 47.8 percent in February when the dispute between SM Entertainment founder Lee Soo-man and current management and Kakao rose to surface, and 69.6 percent this year.

SM Entertainment shares have soared to 130,100 won, surpassing the public tender offer price of 120,000 won proposed by Hybe.

Hybe made clear, however, that it will not raise its takeover bid price.

“The price will remain unchanged until the end of the public tender offer,” said an unnamed official from Hybe.

The tender deadline is March 1, or Feb. 28 when counting in actual business days. There is a possibility that Hybe will fail its tender offer involving minority shareholders if the share price is kept at a higher level than 120,000 won. Hybe, however, has already decided to buy a 14.8 percent stake in SM Entertainment from its founder Lee.

Market insiders note that the outcome of the injunction lawsuit filed by Lee to cancel the rights offering to Kakao will be a game changer in the management feud. The first hearing will take place on Wednesday. It remains to be seen whether the ruling will come before the public tender deadline. If the court rules in favor of Kakao, it will be able to secure a 9.05 percent stake in SM Entertainment.