Games publisher Com2uS has acquired a 4.2 percent stake, or 990,000 shares, in SM Entertainment for an undisclosed amount, the company announced on Tuesday.
Shares of SM Entertainment closed at 71,100 won ($50) on Monday, bringing the price of 990,000 shares to around 70 billion won.
The investment is made “not because the company wants to tip SM Entertainment in its favour,” but because it believes that “SM Entertainment is undervalued and has high growth potential going forward,” according to a Com2uS press release.
SM Entertainment’s stock prices have fallen more than 20 percent since the company peaked at 90,000 won in April last year, due to deteriorating market conditions and the lack of a hit by its artists.
“SM Entertainment is one of the best entertainment companies that has led to the popularization of Korean popular culture around the world,” the company said. “It has sold foundations with sales of 700 billion won and net income of 130 billion won in 2021 and has the most diverse artist portfolio among K-pop agencies.”
The partnership gives Com2uS the opportunity to combine its technologies with SM Entertainment’s intellectual property (IP), particularly in the areas of computer graphics and visual special effects. SM Entertainment has also been willing to embrace visual technology in recent years, such as hosting online virtual concerts during the pandemic.
In September, SM Entertainment’s shares rose 19 percent in one day when it announced it would sever ties with a music production company wholly owned by executive producer Lee Soo-man.
SM Entertainment announced on September 15 that it will terminate its contract with Like Planning, a music production company wholly owned by Lee, by the end of this year.
Founded in 1997, Like Planning is a music production and consulting company that earns 6 percent of SM Entertainment’s revenues in exchange for its music production insights from SM artists.
The company has been signed to SM Entertainment for 20 years and received 11.4 billion won in the first half of this year. The current contract runs until December 2023, which would have been automatically extended if there had been no objections.
Shares of SM Entertainment closed down 5.9 percent from the previous day at 66,900 won.
BY YOON SO-YEON [[email protected]]