HYBE Sells 9.38% Stake in SM Entertainment to Tencent Music for Approximately $177 Million

HYBE, a major South Korean entertainment company, has sold its entire stake in rival SM Entertainment to Tencent Music Entertainment, a Chinese music streaming service. HYBE is transferring 9.38% of SM Entertainment’s shares, equivalent to 2.21 million shares, to Tencent Music. The transaction value amounts to 243.35 billion won, which is roughly $177 million, based on a price of 110,000 won per share, or about $80 per share. HYBE plans to dispose of the shares through an off-market block trade after the market closes on May 30. SM Entertainment is the company behind renowned K-pop groups such as SUPER JUNIOR, EXO, Girls' Generation, Red Velvet, aespa, NCT, and RIIZE. Tencent Music operates platforms like QQ Music, Kugou Music, Kuwo Music, and WeSing and is the owner of China’s largest music streaming service. In a regulatory filing, HYBE stated that this sale is part of a “strategy to select and focus on non-core assets” and explained that “the funds raised will be used to secure future growth drivers.” SM Entertainment said it intends to “work more closely with Tencent Music” following this deal. HYBE attempted a hostile takeover of SM Entertainment in 2023 but only acquired a minority stake; with this full sale, it has completely resolved its shareholding relationship with the rival company. As a result of this transaction, Tencent Music becomes the second-largest shareholder in SM Entertainment. Currently, the largest private shareholder in SM Entertainment is Kakao, including its subsidiary Kakao Entertainment, which holds 40.28% of the shares. Tencent’s major investment in South Korea’s music industry coincides with expectations that China will lift its nearly nine-year ban on K-pop imports. In 2017, China imposed a de facto ban on Korean culture and entertainment imports as retaliation for the deployment of the U.S. missile defense system THAAD. Since around 2016, K-pop groups have faced unofficial bans on performing in China. If relations between the two countries improve, K-pop groups can expect significant revenue increases through higher sales of concert tickets, albums, and merchandise. Tencent Music’s investment is seen as a signal of confidence in the potential for K-pop to enter the Chinese market. According to the International Federation of the Phonographic Industry (IFPI), China is the world’s fifth-largest music market. It is reported that Tencent Holdings also holds stakes in other K-pop labels such as YG Entertainment (4.3% stake) and Kakao Entertainment (4.61% stake).