This failure is expected to disrupt SM's management strategy.
The continuous struggles of Kiist are worsening the sale environment.
SM Entertainment has once again faced a setback in selling its shares of Kiist, putting more pressure on its management strategy. The investment consortium failed to pay the necessary balance for the share acquisition within the deadline, resulting in the contract cancellation.
In a recent statement via the Financial Supervisory Service's electronic disclosure system, SM announced the termination of its share sale agreement with Iro Investment Consortium No. 1 as the major shareholder of Kiist. Last October, SM had planned to transfer a 33.71% stake in Kiist for about 34 billion won, but the investment consortium was unable to pay the remaining 27.2 billion won by the deadline of the 18th, leading to an unavoidable contract termination.
The continuous poor performance of Kiist has further deteriorated the sale environment. The company has recorded net losses for five consecutive years, posting a 5.4 billion won loss in 2023. Even with increased sales expected in 2024, Kiist is projected to incur a net loss of approximately 11 billion won. SM’s management plans to categorize Kiist as a non-core asset under its 'SM 3.0' strategy, but repeated sale failures have led to significant volatility in Kiist's stock price.
This incident could mark a significant turning point in SM Entertainment's management strategy. The ongoing struggles of Kiist have adversely affected the sale, reaffirming how SM perceives Kiist as a non-core asset. Given that Kiist houses renowned actors, its significance goes beyond mere financial performance. SM's asset restructuring clearly indicates their intent to focus on the music sector, but it also symbolizes the risks and opportunities associated with media production companies like Kiist.
On the other hand, the failure of the sale necessitates SM to reconsider its future strategy. Whether they can maintain their current direction of streamlining and focusing on music or seek new acquisition targets will be crucial moving forward. Kiist's poor performance may not remain an isolated case but could potentially worsen across the entire K-content industry.
As Kiist includes prominent actors, their activities could positively impact the company's future. However, the question of how management will implement strategies to revitalize the company still looms large, and it is an element that could influence the ecosystem of the K-content market in the future.
This article is KOSTAR’s reinterpretation of a story originally reported by TVDaily.
Photo: TVDaily
