Catching up on older business news, SM Entertainment recently came under fire from shareholders regarding dividends, failing businesses, and especially payments to founder Lee Soo Man’s private company Like Company.
SME responded by saying they aren’t going to merge and will consider improving dividends and cutting failing businesses.
On July 31, SM Entertainment replied to a letter from one of their major shareholders, KB Asset Management. On June 5, KB Asset Management had sent a letter to SM Entertainment requesting a merger with Lee Soo Man’s personal company, a dividend payout ratio of 30 percent, and a reorganization of businesses that are incurring losses. SM Entertainment has never paid a dividend since the company went public. The agency stated, “We did not implement our dividend policy because we focused on investing for the growth and future of our company. Those goals remain the same today.” However, the company continued, “We are aware that there are growing demands among the shareholders, so we will review plans that can balance reinvestment for the growth and future of the company with shareholder returns of company profit. For example, we will consider methods like distribution of profits or buying back shares. When we have decided upon a concrete plan, we will let you know in detail.” SM Entertainment also added, “After receiving a letter from the shareholders requesting that we reorganize the businesses that are incurring losses, we are considering whether or not to close down SMTOWN Coex Artium.”
However, SM Entertainment drew the line at merging with Lee Soo Man’s personal company, Like Planning. They stated, “Like Planning is not an incorporated business, so merging with the company is not a valid plan from a legal perspective. Moreover, the shareholders do not have the right to enforce such a measure.” “However, we are currently holding close consultations and careful review in order to maintain the basis of our company’s competitiveness and to operate our production in a progressive manner.” KB Asset Management had requested the merger with Like Planning after claiming that SM Entertainment was paying royalties that amounted to 46 percent of SM’s business profits to Like Planning, which Lee Soo Man owns 100 percent. KB Asset Management claimed that these royalties paid to Like Planning were creating a conflict of interest with the minority shareholders.
Buddy, Lee Soo Man doesn’t give a fuck. The stock prices continue to plummet, but by comparison, I guess what does he care?
The remarks left shareholders dissatisfied, causing its stock price to dip on Aug. 1. As of 1:30 p.m., S.M. shares were trading 8.2 percent lower than the previous day’s close.
Likely because others saw that it essentially did nothing.
“Questions have been raised about whether it is fair and well-founded (for S.M.) to pay up to 6 percent of its revenue as expenses to Like Agency, in a process that is nonexistent among market competitors,” said Kim Ki-hoon, an analyst at Hana Financial Investment, in a memo on Aug. 1. Other than the proposed merger plan, S.M. fell short of answering shareholder demands with regards to higher dividends and removing nonprofitable business operations, by saying it would take them into consideration. “Despite the sufficient time given to review the demand by shareholders, (S.M.’s) answer does not indicate any concrete action plan,” Kim wrote.
Yeah, so essentially trying to put the carrot of potential out there in terms of them caving to investors but effectively doing absolutely nothing and maintaining the status quo.
I mean, it makes sense after all, to Lee Soo Man at least. Owning stock is one thing, but a consistent and significant flow of cash? Much better. Fuck the shareholders!