HYBE And SM Entertainment Respond To Each Other’s Statements Following SM CEO Lee Sung Su’s Video

HYBE And SM Entertainment Respond To Each Other’s Statements Following SM CEO Lee Sung Su’s Video

HYBE and SM Entertainment have released consecutive statements to refute the other regarding the current situation involving the two companies.

Following SM CEO Lee Sung Su’s first video on February 16, HYBE released a statement with the following main points:

1. Former chief producer Lee Soo Man can work abroad for his personal producing business tasks unrelated to SM Entertainment, and it does not mean that he will return to SM Entertainment after three years.

2. We have not heard about CT Planning Limited which former chief producer Lee Soo Man is said to be involved with, and regarding the information of its relation to SM Entertainment, we will terminate this according to the share purchase agreement (SPA).

3. We will not get involved if the personal activities promoted by former chief producer Lee Soo Man have no connection to SM Entertainment, and we have not received any details on the ESG activities promoted by former chief producer Lee Soo Man.

In response, SM Entertainment revealed the following statement on February 17:

As CTP (CT Planning Limited), the international version of Like Planning, signed a contract directly with overseas labels, not SM, to hide its true purpose, this is not an issue that can be resolved by HYBE terminating the contract since CTP has no business relationship with SM. In the video uploaded by CEO Lee Sung Su, it was also mentioned that the matter in question was a direct contract between former chief producer Lee Soo Man and overseas labels, not a contract between CTP and SM.

Thus, HYBE’s stance is distorting the fundamental problem of CTP, which is the suspicion of offshore tax evasion.

If HYBE was aware of CTP, the international version of Like Planning, when signing the stock sales contract, then that means [HYBE] participated or turned a blind eye to former chief producer Lee Soo Man’s alleged tax evasion, and if [HYBE] signed the contract without knowing about the issue, it means that they are acknowledging that they were deceived by former chief producer Lee Soo Man. Hence, this would mean that HYBE’s management would need to explain to various shareholders and related agencies as to why an M&A that costs more than 1 trillion won (approximately $768.4 million) was done without once exercising due diligence.

In addition, in the official statement that HYBE published when announcing that they signed a SPA contract with former chief producer Lee Soo Man, the statement said, “Chairman Bang Si Hyuk expressed deep agreement with the Humanity and Sustainability campaign Lee Soo Man announced earlier this year and told Lee Soo Man of his desire to take part in using the influence of sustainable K-pop together,” and “Chairman Bang Si Hyuk stated that HYBE fully agreed with the strategic direction such as the implementation of metaverse, establishment of a multi-label system, and campaign to save the Earth.” We believe it is hard to believe that Chairman Bang Si Hyuk himself has not been informed of the details of the campaign that he claimed he “deeply agreed with.”

HYBE then responded again with this statement later in the day on February 17:

Hello, this is HYBE.

We are revealing HYBE’s statement as follows regarding the statement of refutation released by SM Entertainment (hereafter SM) today.

In the press release we distributed on February 16 regarding the suspicions about CT Planning mentioned by SM Entertainment CEO Lee Sung Su, we said:

When completing a SPA with Lee Soo Man, we were not told of Lee Soo Man’s ownership of the company CTP or of the contract between CTP and SM. Also, in case of a business relationship that we are not aware of, it was included in the contract that Lee Soo Man would resolve any business relationship that is discovered.

If CTP and SM are not directly contracted as said in SM’s refutation, it is even more natural that we are not aware of this. However, according to our contract with Lee Soo Man, it is already mutually agreed upon that no profits will be received regarding SM artists already contracted with CTP even if not direct contracts with SM. In addition, we will manage transparent contracts through our board of directors in order for no problems to arise in the future, so the problem raised by SM is meaningless. We are currently putting in effort to solve SM’s issues and have no reason to distort anything, and there is no reason for suspicions to be brought up regarding our efforts.

However, if SM thinks that the contract with CTP cannot be resolved through our SPA with Lee Soo Man, we want to ask what SM’s stance is on this besides exposing this contract.

Especially as this type of contract does not have much visibility outside of the entertainment agency, the entertainment agency’s management must manage these contracts transparently and fairly for the company and artists. There must be board members who approved this contract when it was being completed, and no matter which board members approved them, we hope that the current board members have taken adequate action about this contract.

The matters that SM is exposing and raising suspicions about are all revealing problems with SM’s corporate governance, and unfortunately, all of these problems occurred internally at SM. We actually resolved SM’s structural problems one by one with a positive viewpoint about the company, and we will continue to put in effort to resolve them.

However, SM must show effort to resolve the actual internal problems in order for these changes to create results. We do not think it is the right approach to raise suspicions against the largest shareholder that is solving SM’s problems.

We request that SM’s directors review if there are any aspects of what they are exposing to the public that they need to take responsibility for because of their approval and put in effort to improve the corporate governance in order to reassure SM’s fans, employees, artists, and stockholders.

Thank you.

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