- Chairman Bang Si-hyuk was accused of pocketing 400 billion won ($285 million) from HYBE’s initial offering.
- Bang was paid the amount through undisclosed shareholder agreements with private equity funds under the condition that the IPO succeeded.
- HYBE denied allegations of illegal conduct amid reports that the company was being examined by the Financial Supervisory Service (FSS) for potential violations of securities laws.
South Korea’s financial regulating body is examining whether there was any illegal activity involved during HYBE’s IPO, following media reports that Chairman Bang Si-hyuk unfairly benefited with a payment of 400 billion KRW ($285 million) from undisclosed deals with private equity funds (PEF).
The Financial Supervisory Service (FSS) is currently examining whether there were any violations of the Capital Markets Act amid controversy over the ethical considerations of such shareholder agreements.
The deals between Bang and the PEFs (STIC Investments, Eastone Equity Partners, and Neumain Equity) included a clause stipulating that the PEFs would share 30% of the stock sale profits with Bang if the IPO was successful. HYBE later listed for an offering price of 135,000 KRW per share, though that number doubled after its debut on the market. That same week, the stock price fell 60% due to high sales volume.
HYBE argued that the shareholder agreement in question had been reviewed and approved by the underwriters of the IPO, further adding that legal advisors had determined that the “specific shareholder agreement” did not “harm general shareholders.”
A representative for the firm responsible for the underwriting explained that the private agreement was one made between shareholders and did not require disclosure, adding that the securities report did mention the possibility of private equity share sales.
It was further reported that Bang invested most of the capital gains back into HYBE.
As a rule, a company intending an IPO must disclose any agreements involving profit-sharing with its majority shareholders. When asked why HYBE was allowed to omit this disclosure, a representative of the stock exchange explained that, “At the time of HYBE’s IPO, Chairman Bang was the majority shareholder with over 40% of the shares, leading to a determination that there was no need to be concerned about a change in majority shareholders.”
Source:
