HYBE reportedly sells its entire SM Entertainment stake worth roughly $198M to China’s Tencent Music: All you need to know

In a significant reshuffling of K-pop industry stakes, HYBE has officially ended its two-year-long investment in SM Entertainment by selling its remaining shares to Tencent Music Entertainment. The transaction was revealed following a board meeting on May 27, 2025, as per YONHAP NEWS AGENCY. This marks a decisive move by the umbrella company to offload what it now considers a non-core asset.

The deal involves the transfer of 2,212,237 shares, equivalent to a 9.38% stake in SM Entertainment, as per the South Korean media outlet. Although earlier reports estimated the shareholding to be 9.66%, the seller confirmed the final figure to be 9.38% in its regulatory filing. The sale will be executed through an after-hours block trade scheduled for May 30, once the Korean stock market closes.

Each share will be sold at a price of 110,000 won as per YONHAP NEWS AGENCY. This represents a 15.32% discount compared to SM Entertainment's closing price of 129,900 won on the day of the announcement. Despite the markdown, the total value of the transaction amounts to approximately 243.3 billion won, which is roughly $198 million at current exchange rates.

With this acquisition, following Kakao, Tencent Music is set to become the second-largest shareholder of SM Entertainment, an agency of Kpop groups like EXO, Red Velvet, aespa, and more. The original purchasing of the shares happened in early 2023 during an intense contest to gain influence over SM’s management, which ultimately ended in Kakao’s favor.

In a statement to YONHAP NEWS AGENCY, the agency of Kpop groups like BTS, Seventeen, and Le Sserafim, clarified the rationale behind the divestment, explaining:

“We divested non-core assets as part of a choice and concentration strategy. Secured funds will be used to secure future growth engines.”

This move is seen as part of a broader corporate strategy to streamline operations and reallocate resources toward new investment opportunities and business areas central to HYBE’s evolving vision.

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HYBE ends two-year SM Entertainment investment, offloads remaining stake to Tencent Music for $198M

HYBE’s involvement with SM began in February 2023 when the former acquired a 14.8% stake in SM from its founder and previous executive producer Lee Soo-man, as per South Korean news outlet BusinessKorea. The acquisition, priced at approximately 120,000 won per share and amounting to 422.8 billion won, was an attempt by the company to gain managerial control over SM Entertainment.

Following this, the umbrella company launched a public tender offer to acquire an additional 25% of shares from the market. However, an intense contest with Kakao limited its success. All the company could manage was to secure an extra 0.98% more, bringing its total stake to 15.78%.

As per BusinessKorea, facing defeat in the management control battle, HYBE accepted Kakao’s public offer in March 2023, selling off 8.62% of its SM stake at 150,000 won per share. Despite only being able to sell a portion due to limited allotment, HYBE earned a profit of approximately 50,000,000,000 KRW from the transaction. This reduced its stake to 8.81%.

Later that year, Lee Soo-man invoked his right to sell the remaining shares, transferring them to HYBE, with which the company’s stake rose once more to 12.58%. Even so, the company continued to pursue a full exit from its SM holdings.

As per the outlet, the first major step in this direction occurred in May 2024, when HYBE sold over 3% of its SM shares via a block deal. However, as this transaction was executed in the low 90,000 KRW range, the company incurred some financial losses.

With the final transfer of the rest of its shares to Tencent Music at a price below the original purchase value, the umbrella company has now completely divested its holdings in SM. The implications of this sale are substantial, according to BusinessKorea.

Kakao and its entertainment arm currently hold around 41% of SM shares. Following this acquisition, Tencent Music is positioned to become SM Entertainment’s second-largest shareholder.

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Reason for SM Entertainment's exit

As per Moneycontrol, HYBE has attributed its complete divestment from SM Entertainment to a broader strategic realignment. This is aimed at streamlining its portfolio and concentrating on core business priorities. According to SPOTV news, the company stated that the sale is part of a “reorganization of non-core assets,”. They hint that SM Entertainment no longer fits within HYBE’s long-term vision.

The decision comes as the company pivots toward initiatives focused on global expansion, technological advancement, and the development of new talent. These forward-looking priorities are also being shaped by the anticipated return of BTS in 2025 following the group’s ongoing military enlistment, as per Moneycontrol.

The company’s current efforts are concentrated on strengthening platforms such as Weverse and preparing for a new era of global growth.

The timing of the SM share sale also aligns with favorable market conditions, as per the outlet. SM Entertainment’s stock has climbed approximately 20% over the past month, driven by optimism around a potential easing of Chinese restrictions on Korean entertainment. This speculation has boosted confidence in renewed demand for K-pop content across the Chinese market.

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This exit not only concludes a high-profile corporate chapter but also removes it from direct competition with SM Entertainment, as per Moneycontrol. Freed from overlapping interests, HYBE is now positioned to consolidate its resources and pursue targeted growth areas without the distractions of inter-agency rivalry.