Tencent to become second-largest shareholder in K-Pop agency SM Entertainment

On May 27, 2025, HYBE announced through a public disclosure and filing with the Financial Supervisory Service that it will sell its entire stake in SM Entertainment to Tencent Music Entertainment. The transaction involves:

Shares Sold: 2,212,237 shares, representing HYBE’s 9.66% stake.

Price per Share: 110,000 won (approximately $80), totaling 243.35 billion won (roughly $177 million).

Transaction Method: A block trade after market close on May 30, 2025, with shares transferred to Tencent Music’s Hong Kong subsidiary.

Post-Deal Shareholder Structure: Tencent will hold a 9.7% stake, making it the second-largest shareholder after Kakao Corp and its affiliate Kakao Entertainment, which have a 42% controlling stake.

SM Entertainment, founded in 1995, is one of South Korea’s “Big Three” K-Pop agencies, known for managing artists like EXO, NCT, and aespa. HYBE’s involvement with SM began in early 2023 when it acquired a 14.8% stake from SM founder Lee Soo Man during a competitive bidding process with Kakao. However, Kakao secured management control, leading HYBE to sell part of its shares to Kakao and now the remaining stake to Tencent.

Tencent Music Entertainment, a subsidiary of Tencent, has been a significant player in China’s music streaming market. It operates platforms like QQ Music, Kugou Music, Kuwo Music, and WeSing, with over 800 million active users. Since 2019, Tencent has partnered strategically with SM Entertainment for music distribution and marketing in China, which likely facilitated this acquisition.

Multiple sources report that HYBE’s official statement indicates that the sale is part of a “choice and concentration strategy” to divest non-core assets and allocate capital for future growth. This aligns with HYBE’s focus on its core artists and global expansion, especially as BTS members are currently on military hiatus. The sale marks the end of HYBE’s two-year investment in SM Entertainment, which began amid a high-profile corporate battle.

The deal occurs amid increasing foreign investment in South Korea’s entertainment industry. Kakao, with its 42% stake, remains the largest shareholder, while Tencent’s entry as the second-largest shareholder could shift dynamics in the K-pop sector. The transaction value of $177 million reflects SM’s market valuation and the strategic importance of its artist roster and global fan base.

Strategic Implications

For SM Entertainment: As mentioned in some reports, Tencent’s involvement could enhance SM’s presence in China, potentially lifting the unofficial ban on K-Pop concerts since 2016. This could open new revenue streams through concerts, streaming, and merchandise sales. However, given Tencent’s influence, it raises concerns about creative control and the agency’s independence.

For Tencent: The acquisition aligns with Tencent’s strategy to expand in the global entertainment industry, particularly in K-pop, which has a massive international following. Tencent’s existing music platforms could integrate SM’s content, boosting user engagement and revenue.

For HYBE: The sale allows HYBE to streamline its portfolio, focusing on core assets and new growth opportunities, such as technology investments or global artist development.

Public and Social Media Reactions

As of May 27, 2025, social media discussions on X show mixed reactions. Some fans are relieved that HYBE is no longer involved, citing past tensions, with posts like “YES, AKHIRNYA UDAH GAK KETEMPELAN 😍” from @bubblibubblie, suggesting a positive shift. Others, like @grok, express concerns about foreign control, noting, “SM may expand in China via Tencent’s platform, yet risks creative control concerns.” Speculation includes increased budgets for SM artists and more Chinese trainees debuting, as seen in @xooeun_ _’s post: “we’re getting that budget and more Chinese trainees to debut in the future… tell me this good?”