South Korean entertainment giant HYBE is selling its entire 9.38% stake in rival K-Pop firm SM Entertainment.
The buyer is Tencent Music Entertainment, China’s largest owner of music streaming services, which is acquiring the 2.21 million shares in SM Entertainment held by HYBE in a transaction worth 243.35 billion South Korean won ($177m at current exchange rates).
SM Entertainment is the company behind prominent K-pop acts like Super Junior, EXO, Girls’ Generation, Red Velvet, aespa, NCT, and Riize.
TME operates platforms including QQ Music, Kugou Music, Kuwo Music, and WeSing.
HYBE disclosed the share sale in a regulatory filing on Tuesday (May 27), which reveals that TME is buying the shares at 110,000 South Korean won (approximately $80) each.
HYBE said that the stocks “will be disposed of through after-hours block trading after the market closes on May 30, 2025”.
South Korea’s Yonhap news agency cites HYBE as saying that it has “divested non-core assets as part of a choice and concentration strategy,” with the company adding that the “Secured funds will be used to secure future growth engines”.
Yonhap reports that SM Entertainment said that the company plans to “work more closely with Tencent Music” following the share sale.
SM Entertainment was the subject of a flurry of music industry media headlines in 2023, as rival HYBE made a hostile takeover play for the Korean company. In the end, HYBE took control of a minority stake in SM.
Following the latest transaction announced this week, Tencent Music will become the second-largest shareholder in SM Entertainment, as HYBE exits its position in the rival K-Pop company.
The largest private stakeholder in SM Entertainment is Kakao (and subsidiary, Kakao Entertainment), which together hold a combined 40.28% stake in SM Entertainment (see below).
Tencent Music’s significant investment in a South Korean music company arrives alongside reports that TME’s home market of China is set to lift a ban on South Korean cultural and entertainment imports.
The de facto ban was imposed by China in 2017 in retaliation for the deployment of a U.S. missile system in South Korea.
Improved relations between the two countries could result in a substantial uplift in concert ticket, album, and merch sales for South Korean companies as they expand beyond their home market amid the continued rise in K-pop’s global popularity. K-pop groups have reportedly been unofficially barred from performing in China since around 2016/2017.
Tencent Music’s investment signals a vote of confidence in South Korean Entertainment’s future positioning in the Chinese market, the world’s fifth-largest recorded music market according to the IFPI.
Yonhap points out that Tencent Music parent Tencent Holdings also owns stakes in other K-pop labels, like YG Entertainment (a 4.3% stake) and Kakao Entertainment (a 4.61% stake).
Another sign of strengthening ties between China-headquartered DSPs and South Korean music companies arrived just yesterday (Monday, May 26). South Korea’s RBW Inc., a content production company and home to K-POP acts such as MAMAMOO, ONEUS, ONEWE, and PURPLE KISS, has struck a strategic copyright partnership with Tencent Music rival NetEase Cloud Music.
According to the announcement about RBW’s NetEase deal, the “alliance goes beyond conventional music distribution, aiming to foster deeper industry cooperation and cultural exchange between Korea and China”.
HYBE originally acquired a 14.8% stake in SM from SM’s founder and former Chief Producer Lee Soo Man in February 2023 in a deal worth approximately USD $335 million.
After HYBE acquired that 14.8% stake in SM from the latter company’s founder in February 2023, it revealed that it planned to acquire an additional 25.2% of SM Entertainment’s shares – which would have taken HYBE’s total shareholding up to 40% – via a tender offer to SM’s minority shareholders.
HYBE’s takeover plan fell short, however, only managing to acquire an additional 0.98% stake in SM Entertainment, raising its ownership to 15.78% (including the 14.8% stake acquired in February 2023).
Kakao / Kakao Entertainment then launched its own tender offer for SM shareholders at a higher per-share price than HYBE’s bid.
Kakao had already agreed a deal to buy 9.05% of SM in February 2023, via the purchase of bonds and newly-issued shares. However, Lee Soo Man successfully blocked this buyout attempt in a Seoul court via an injunction.
HYBE’s attempt to buy a 40% stake in SM was met with strong resistance from SM’s management. On March 12, 2023, HYBE ended its takeover attempt of SM.
By the end of March 2023, Kakao Corp. officially became the largest shareholder in SM Entertainment, increasing its stake in SM to 39.87% from the previous 4.9% after completing its tender offer for shares in the agency.
HYBE had initially planned to divest its entire 15.78% stake in SM, but remained a shareholder of SM with an 8.81% stake.
HYBE then upped its stake in stake in SM to around 12.6% in March 2024, when it acquired 869,948 shares in SM Entertainment from SM’s founder and former Chief Producer Lee Soo Man.
HYBE sold a 3.2% stake in SM Entertainment in May last year, reducing its shareholding to 9.38%, which is now being sold to Tencent Music Entertainment.
HYBE published its Q1 results recently, posting a 38.7% YoY jump in revenue to KRW 500.6 billion ($358.5m), a 50.3% YoY increase in operating profit to KRW 21.6 billion ($15.5m), and a 398% YoY jump in net profit to KRW 55.3 billion ($39.6m).
SM Entertainment Group reported a 5.2% YoY jump in group revenue for the first quarter of 2025, driven by increased music and concert revenue.
According to TME’s latest earnings report, the company’s total number of paying users increased by 8.3% YoY to 122.9 million in Q1 2025, up by 1.9 million versus the prior quarter of Q4 2024.Music Business Worldwide
