Home > Business > Industry

SM Entertainment shares soar 19 percent Friday following announcement

Published: 16 Sep. 2022, 11:23 Updated: 16 Sep. 2022, 16:54

Lee Soo-man, chief producer of SM Entertainment [SM ENTERTAINMENT]

SM Entertainment's shares soared 19 percent on Friday after the K-pop company announced on Thursday it may sever ties with a music production company 100 percent owned by chief producer Lee Soo-man.

The K-pop agency, the third largest in Korea by market cap, said Thursday that it is seeking to terminate its contract with Like Planning, a music production company wholly owned by Lee, by the end of this year. Home to K-pop bands NCT, Red Velvet and aespa, SM has a 1.8-trillion-won ($1.3 billion) market cap, following BTS's agency HYBE and Stray Kids' agency JYP Entertainment.

Founded in 1997, Like Planning is a music production and consultation company that has been taking 6 percent of SM Entertainment’s revenue for providing its music insight in making SM artists’ music.

It has been signed with SM Entertainment for 20 years and was paid 11.4 billion won during the first half of this year. The ongoing contract lasts until December 2023, which would have been automatically renewed had there been no objections.

The early termination of contract came as a result of an official shareholder’s letter from Align Partners Capital Management, which owns 1.1 percent of SM Entertainment. The investment company has been criticizing the two companies' relationship as "damaging shareholder value" and demanding the agency cut ties with Like Holdings since earlier this year.

KB Asset Management, a 5.1-percent owner of SM Entertainment, demanded the two companies merge in 2019. SM Entertainment refused, saying that “Like Planning is an unincorporated business run by Lee Soo-man so it cannot be acquired.”

“Cutting ties with Like Planning is expected to increase SM Entertainment’s operating profit up to 60 percent,” said a spokesperson for Align Partners. “We expect that the move will give SM Entertainment the push it needs to break free from the one-person-oriented structure to a more stable and sustainable one.”

SM Entertainment closed at 76,500 won on Friday. It closed at 64,500 won on Thursday.

BY YOON SO-YEON [[email protected]]