"HYBE needs to be destroyed before BTS returns" vs. "Pushing out NewJeans' album" Conflicting arguments [General Shareholders meeting D-12]
May 19, 2024
Conflict between parent company HYBE vs. Min Heejin, CEO of ADOR
Disclosure, truth battle, legal dispute ahead of provisional shareholders' meeting
Revelation of Evidence for Reasons for Dismissal vs. Defending with stories from both sides
"Min Heejin ordered that HYBE should fail before returning to BTS' vs. "HYBE requires NewJeans to stand up."
The conflict between HYBE and its affiliated label, ADOR, Min Heejin, over allegations of "taking over management control" is leading to legal disputes and revelations. The two sides are scrambling to release KakaoTalk conversations and internal e-mails and present important cards that can move the direction of public opinion.
During the recent questioning of the prohibition of voting rights at the Seoul Central District Court, the two sides presented various pieces of evidence to support their arguments through 60 defense documents each.
The reason why the two sides continue to engage in a battle close to the disclosure is that the issue is whether the voting rights of the shareholders' contract are binding (contract) or not. The shareholder contract between HYBE and CEO Min Heejin contains the phrase, "We should take steps to exercise voting rights at the shareholders' meeting of ADOR so that we can maintain the position of CEO and in-house doctor of ADOR for a period of five years from the date of establishment."
According to the legal community, if the court does not recognize the effect of the arrest, the application for provisional injunction will be dismissed, but if so, the direction will be divided over the interpretation and violation of the provisions contained in the contract between shareholders. Looking at the revelations of the two sides, HYBE is providing evidence to support Min's position that the dismissal is justified one after another. ▶ In case of damage of more than 1 billion won ▶ Violation of contract between shareholders ▶ breach of trust, embezzlement, etc. ▶ Evidence to prove the reason for disqualification from work is collected and disclosed. CEO Min's side focused on the defense of this and the post-war story of a series of actions.
"There is no exact precedent for the binding of voting rights, and there are many related debates," the court said. "If we submit an additional written position by the 24th, we will review it and decide before 31st, the date of the extraordinary shareholders' meeting."
Min "Pressing after whistleblowing" vs. HYBE "Naver meets Dunamu and brags about contacting Zhen Province"
The conflict between HYBE and CEO Min Heejin began with an in-house audit based on allegations of "taking over management rights." CEO Min said, "After the whistleblower, I took a picture and pressed it," but HYBE said that she conducted an audit after detecting circumstantial evidence that Min planned and systematically and planned the takeover of management rights only for her financial gain."
Earlier, the positions of the two sides were also mixed on the date of questioning the arrest and provisional disposition of voting rights.
HYBE release the scenario of Min's plan to take over management rights in chronological order. According to HYBE, Min agreed earlier this year include L, who used to be a team leader at HYBE IR, and give him 0.35 percent of the money he would earn after moving independently from HYBE.
After that, Deputy CEO L's plan to take over management rights will be implemented in earnest. On January 24, he met with N Capital to discuss ADOR's IPO plan, and on February 7, he met with an outside lawyer to discuss ADOR's MBO and IPO plan.
HYBE said, "(Deputy CEO L) contacted internal executives, external investors, analysts, etc. He contacted a certain capital company several times and boasted that the certain financial group was running for Zhen Province," adding, "It was clear that exercising put opinions with close operating profit for the last few years is not what creditors wants."
In March and April, he tried to contact VC investors' meeting, Dunamu, Naver, and financial company A. According to HYBE, when Dunamu and Naver informed HYBE to this and blocked contact, Min claimed, "We ordered L to systematically manage friendly forces by asking him to organize investment destinations from 1st to 10th in terms of Investment amount."
Documents from the audit process include "Project 1945," "VC Note," "HYBE"s seven sins," and "Investigation Documents." ▶The previously disclosed put option exercise price → 13 times the existing operating profit ▶ 30 times' the demand ▶ Downside protection of IPR 15% ▶ NewJeans exclusive contract request for termination.
Min's side refuted all of HYBE's claims. "There is no specific plan for changes in controlling shareholders, and it is impossible to implement without HYBE's consent. Min Heejin has never planned specific details for changes in controlling shareholders. It's jus an imagination."
At the same time, he said, "I have never been advised VC (Venture Capital) to bring NewJeans out, nor have I have never met with external investors to express their intention to invest," and added, *Lee Sangwoo, vice president only promoted NewJeans' performance." However regarding the meeting with Dunamu and Naver, they said, "We are checking internally."
During the interrogation day, the conversation between Min and L, which could be presumed to be a scenario for the termination of NewJeans' exclusive contract, was also disclosed.
According to HYBE, CEO Min and Deputy CEO L estimated "hundreds of billions of won in damages when the exclusive contract with NewJeans is terminated" during the conversation from March 14th to 15th.
However, CEO Min countered, "It is only a rough way to calculate the corporate value of ADOR, where NewJeans belongs," adding, "ADOR's management was also concerned about the damage caused by the members' withdrawal."
Min's side directly disclosed their conversations on the basis of the agreement. In the conversation, L said, "Even if HYBE asks for an insanely high amount, it is difficult to exceed a certain amount." He added, "With such negotiations costs more than a certain amount," adding, "With such negotiations as 600 billion won in contract termination costs, 100 billion won in new down payment, and 20 billion won in initial investment from CEO, I think we can meet at around 800 billion won. We had no intention of terminating the exclusive contract between Dodo and NewJeans," he said.
HYBE: "Min ends HYBE a year before BTS returns" vs. Min: "We demand the NewJeans album be pushed out"
The conflict between HYBE and Min is also causing a flurry of sensitive revelations. HYBE claimed that CEO Min had planned to complete the so-called "HYBE collapse scenario" before the return of super IP (Intellectual Property) BTS, who is in the midst of military service, and CEO Min claimed that HYBE was "pushing out the album".
First, HYBE claimed that they confirmed in the transcript of the conversation, which they interpreted as a "takeover of management rights" scenario, that CEO Min and vice president L confirmed that the year before BTS returns was a weak time of HYBE, so at that time, HYBE and Bang Sihyuk will end. The two people had such a conversation on February 4th.
In the process, HYBE revealed, "CEO Min tried to contact the accountant in charge of BTS, who had no reason to meet," and added, "Let's lose HYBE's trust and then just get out of the door." HYBE saw the conversation between the two as "planning to break down HYBE's main business strategy, the multi-label system."
In particular, HYBE said, "CEO Min asked us to use the media to expose the music marketing activities as a 'pushback" as part of a strategy to lose HYBE's trust. In the April 20th conversation, Deputy CEO L and Deputy CEO S admitted that the issue was not raised to solve the problem, saying that the improvement of the problem, which Min raised as a "replainer," was not raised from the beginning. The goal is to raise external issues, and the best thing is that HYBE proposes to compromise with me to prevent major bad news," they said.
In HYBE, CEO Min's mock situation is "an act that seriously violates the contract between shareholders and a representative of the subsidiary," adding, "The purpose of truth is it to pressure HYBE to realize his plant to pursue private interests."
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"Pushing out a record" refers to the act of placing a large order using a distributor or an overseas subsidiary to artificially inflate the initial sales volume by improvising fan events.
"NewJeans was encouraged to push back 100,000 albums because it could break the first record of aespa when the second EP "Get Up" was released, but it was rejected because it violated ADOR's business philosophy. However, I understand that this is prevalent within HYBE Labels. Please investigate closely whether there is a history of trading with conditional return to the subsidiary and deal with it a lot," she said.
HYBE, however, rejected suspicions by releasing the full text of the response E-mail sent to CEO Min on April 22. HYBE said in its email that labels under HYBE do not push out albums. "This is what HYBE has already answered to ADOR several times, and it remains in the social network service (SNS) records between CEO Park Jiwon and CEO Min."
"CEO Min even claims from HYBE that 'NewJeans was invited to push out' to justify her claims. This was just part of a conversation that took place without any hesitation, and HYBE is running the business with a clear principle of 'not pushing out for initial record competition," they said.
HYBE also mentioned the case of NewJeans' mini-album "Get Up" sales activity, pointing out that legitimate sales promotion activities could also be a push out the album, as CEO Min claimed.
HYBE said, "The Japanese distributor UMJ initially showed reluctance to purchase more than 90,000 copies of the album, but later, through a consultation involving ADOR, 60,000 more copies were added, resulting in a total of 150,000 sales," adding, "This could be equivalent to a large order from ADOR."
"Due to the order, there are currently 110,000 inventory accumulated in distributors. In order to digest some of the increased volume, ADOR held an additional fan signing event on August 20, 2023 involving all NewJeans members, which mag be an urgent fan event," he said.
HYBE emphasized that such activities are part of sales promotion activities. At the same time, he said, "The argument that if NewJeans does it, it is justified, and if other artists do it, it is an act of pushing . We have serious concerns about the actions and intentions of raising the easily misunderstood issue of 'album pushing' without proper confirmation," adding, "If you really thought that pushback existed within HYBE and was a big problem in the K-Pop market, you should have thoroughly verified the facts first," he criticized.
NewJeans vs. Bang Sihyuk's announce their stance for the first time... What are your future plans?
"Min Heejin is indispensable to NewJeans" vs. "Min is demeaning and gaslighting members."
With no signs of abating the conflict between the two sides, Bang Sihyuk, Chairman of HYBE, and NewJeans made their position for the first time since the incident.
Bang Sihyuk, Chairman of HYBE, submitted a petition in time for the interrogation, saying, "Some believe that the problem of multi-label has been revealed about Min Heejin's actions, but no sophisticated system or through contract can completely prevent human malice. A person's malicious behavior should not undermine the system that many people have long created. And I think that is the power of our social system to prevent individual malice and evil acts, from breaking down social systems and order."
On the other hand, the parents of NewJeans members appointed lawyer Kang Jinseok as their legal representatives on the 14th, ahead of the interrogation date for the application for a provisional injunction against the exercise of voting rights filed by CEO Min. Lawyer Kang is a lawyer who has dealt with many cases of disputes over exclusive contracts for entertainers.
NewJeans submitted a petition to the court through lawyer Kang before the interrogation date. The contents of the petition were not disclosed, but an official said, "Min Heejin should not be dismissed," hinting that he wanted to be with Min.
CEO Min's side emphasized the "separate and strong relationship" between herself, NewJeans members, and parents, and is using it is a 'right to defend dismissal," but HYBE's judgement is different.
CEO Min said at the interrogation date, "I couldn't bear to say that NewJeans would not make a debut if it wasn't for me, but I said it was difficult to treat NewJeans members artists and it was terrible to bear and take care of them," HYBE said. "CEO Min wants NewJeans to stray in passive roles and glorifies a kind of gaslighting as a 'mother-daughter relationship'. CEO Min's interest is not the same NewJeans themselves as she gave birth, but the money NewJeans make." He criticized, "If you are a true 'mother', you have to be a shield and block all wind waves, but the creditors is protecting yourself by using NewJeans members as a shield."
He also said, "I disparaged NewJeans members, such as 'it is difficult to treat NewJeans as an artist and it is terrible to support them,' and 'it is disgusting but I am holding it in.'"
However, with the submission of a petition by NewJeans and the appointment of an entertainment dispute lawyer, NewJeans seems to have completely empowered CEO Min. The industry is also raising the possibility that a full-fledged dispute between NewJeans and HYBE could begin over NewJeans' full-fledged voice after appointing lawyer Kang.
Original article: Herald Economy
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