At first glance, it seems plausible. Kim Joo-young, the new CEO of ADOR, announced in an internal email shortly after his appointment that former CEO Min Hee-jin would continue to oversee the production of NewJeans while management and production would be separated.
Seemingly in response, HYBE’s stock price rose for two consecutive days after ADOR’s board of directors dismissed Min Hee-jin on the 27th of last month. On the 28th, the stock price rose by 2.94%, and on the 29th, it increased by 3.02%. Analysts and the media have been quick to attribute this stock rise to the resolution of management risks following Min Hee-jin’s dismissal.
However, many of these analyses omit the fact that HYBE simultaneously announced a share buyback on that day. HYBE repurchased shares worth approximately 26.6 billion KRW on the same day they dismissed Min Hee-jin. Additionally, HYBE terminated the shareholder agreement with Min Hee-jin and filed a lawsuit to confirm the validity of this termination.
Generally, a share buyback is considered positive news for stock prices. Moreover, by announcing the termination of the shareholder agreement, HYBE effectively eliminated a put option worth around 100 billion KRW that was supposed to be given to Min Hee-jin. Since they repurchased shares worth 26.6 billion KRW and no longer had to pay the 100 billion KRW put option, it’s no surprise that this had a positive impact on the stock price.
Attributing the stock rise solely to the resolution of management risks without considering these other factors is akin to selective observation.
HYBE’s stock price fell by 1.65% on the 30th of last month, contrary to the rise in other entertainment stocks, and continued to drop by 2.49% on the 2nd of this month.
This indicates that the market is beginning to recognize the flaws in such analyses. This realization isn’t solely because Min Hee-jin is claiming that the shareholder agreement with HYBE is still valid and is rejecting the producer contract offered by ADOR due to numerous unfavorable clauses.
Contracts cannot be unilaterally terminated without the other party’s consent unless there is a breach. The court, in ruling on Min Hee-jin’s request for an injunction to prevent the exercise of voting rights, determined that she had not violated the shareholder agreement with HYBE. Although the injunction was about preventing the exercise of voting rights, it’s clear that the court did not see any violation of the shareholder agreement, contrary to HYBE’s claims.
Therefore, the subsequent decline in HYBE’s stock price after a brief rise may indicate that the market is becoming aware of the potential for a lengthy and costly lawsuit over whether the shareholder agreement was violated. While HYBE filed a lawsuit to prevent Min Hee-jin from seeking an injunction, there’s a strong possibility that she will file a lawsuit against HYBE for breach of the shareholder agreement, potentially involving billions of KRW.
Industry insiders speculate that Min Hee-jin’s side may file a lawsuit against HYBE as early as this month.
If HYBE and Min Hee-jin become embroiled in a lawsuit over the shareholder agreement, this risk could persist for quite some time. The amount involved in the put option, originally estimated at 100 billion KRW, could increase significantly, especially with NewJeans’ world tour scheduled for next year. Additionally, Min Hee-jin’s salary during her contract period and any penalties for breach of contract could be factored in. The fate of the remaining shares that are not subject to the put option will also be a key issue.
Typically, a civil lawsuit in the first instance takes about one to one and a half years. Since it’s a monetary claim, an execution based on the first instance’s result could be requested without necessarily going to the Supreme Court. In other words, unless a settlement is reached, HYBE could face a long-term risk lasting at least one and a half years.
Regardless of the lawsuit, if Min Hee-jin continues to serve as a producer at ADOR, HYBE and ADOR could potentially manage NewJeans stably. This may have been why the new CEO, Kim Joo-young, announced that Min Hee-jin would continue as the producer.
However, it seems unlikely that Min Hee-jin will remain at ADOR. While Kim Joo-young declared that Min Hee-jin would continue producing NewJeans, he also announced that a re-investigation would be conducted into allegations that Min tried to cover up a past sexual harassment incident within the company, with measures to prevent recurrence to be implemented afterward.
Given that Kim Joo-young was HYBE’s Chief Human Resources Officer when the incident was originally dismissed without charges, it’s unclear whether he will overturn his previous conclusion, only address the allegations of Min’s involvement, or dismiss the case again as baseless. However, considering the broken trust between Min Hee-jin and HYBE, it seems unlikely that she will accept this re-investigation, making it less likely that she will remain at ADOR.
If Min Hee-jin leaves ADOR, the company could frame it as a case where they offered her the role of NewJeans producer, but she refused.
Meanwhile, Kim Joo-young faces the clear challenge of stabilizing ADOR by managing NewJeans members and staff effectively.
According to industry reports, Kim Joo-young met with NewJeans members, their managers, and ADOR staff on the 30th of last month to discuss plans for Min Hee-jin’s role as a producer and to seek organizational stability.
However, problems quickly arose. Sources indicate that ADOR’s new management raised serious copyright issues on the 31st of last month regarding the “ETA Director’s Cut” uploaded on the YouTube channel operated by Dolphin Kidnapping Group, which has been producing NewJeans’ music videos.
ADOR’s staff reportedly explained to the new management that the “ETA Director’s Cut” was an earlier version of the ending revised at Apple’s request and that it had been agreed upon with Dolphin Kidnapping Group to upload it for NewJeans fans in advance. They also mentioned that the music videos for “Ditto” and “OMG” had been uploaded to the same channel after a certain period.
Nevertheless, the “ETA Director’s Cut” of NewJeans was eventually removed from the Dolphin Kidnapping Crew channel, along with all other videos related to NewJeans music videos. Regarding this, Director Shin Woo-seok stated on his social media, “It seems there has been a change in ADOR’s policies with the new management. Due to a request from ADOR, all videos and channels related to NewJeans music videos that Dolphin Kidnapping Crew has worked on and uploaded, as well as future videos that were planned to be uploaded, can no longer be made public,” adding, “It seems that future collaborations between Dolphin Kidnapping Crew and ADOR will be impossible.”
Although ADOR rebutted by saying, “The copyright for all content, including NewJeans’ music videos, belongs to ADOR, so they should be posted on our official channel,” it appears that the relationship between ADOR and Dolphin Kidnapping Crew has reached an impasse, as suggested by Director Shin’s remarks.
The popularity of NewJeans has been significantly boosted by the music videos produced by Dolphin Kidnapping Crew. The behind-the-scenes videos, Director’s Cuts, and other content that were uploaded to Dolphin Kidnapping Crew’s channel after being initially released on ADOR’s official YouTube channel have played a major role in promoting NewJeans. Considering this, the situation is undoubtedly regrettable.
The question now is whether NewJeans and ADOR can stabilize following the dismissal of Director Min Hee-jin. This issue is likely to have a considerable impact on HYBE’s stock price. The entertainment industry and beyond are closely watching to see if the new management can successfully lead ADOR’s sole artist, NewJeans, in a stable manner.