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[Alpha Biz=(Chicago) Reporter Paul Lee] HYBE said it would dispose of its stake in SM Entertainment (SM) by participating in Kakao's public purchase, but it is in a position to hold the remaining SM shares for the time being as there is a growing possibility that it will not be able to sell all of its shares.

The problem is that if SM shares plunge after the tender purchase, it is likely to incur tens of billions of won in valuation losses.

According to the financial investment industry on the 25th, Kakao's public purchase of 35% of SM-issued shares at 150,000 won per share ended with 'overbooking' beyond the target amount.

HYBE, the largest shareholder with a 15.78% stake in SM, and Com2us, which acquired 4.2% at the end of last year, will participate in and dispose of all SM shares held by Kakao.

SM minority shareholders are also known to have participated in the public purchase.

HYBE is expected to sell only 1.39 million of its 3,537,237 shares. Since Hive bought SM shares for 120,000 won per share earlier, the resulting market profit is about 41.7 billion won.

SM closed at 107,200 won on the KOSDAQ market on the 24th. If the stock price falls to 90,000 won in early February since its opening on the 27th, HYBE will lose 30,000 won per share, with the valuation loss reaching 70 billion won. In other words, losses are greater than profits from tender purchase.

An HYBE official said the plan to dispose of SM shares that will remain is "yet to be decided."

 

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