Report: HYBE Suspected of Failing to Disclose Related-Party Transactions in Internal Producing
Recently, HYBE’s “internal transactions” have come under scrutiny. This is because in the third quarter of this year, affiliate HYBE IM received 4 billion won from ADOR. ADOR collaborated with KRAFTON, the operator of the game Battlegrounds (PUBG), using NewJeans IP, but HYBE IM, a game software company, took the licensing revenue. Although ADOR’s IP was utilized, ADOR actually paid HYBE IM, raising suspicions that the internal transaction details are opaque. Additionally, questions are being raised about the producing services that Bang Si-hyuk, the Chairman and controlling shareholder of HYBE, provides to affiliates. Chairman Bang Si-hyuk provides producing to HYBE labels, but this information cannot be found in disclosure documents.
HYBE explains that Chairman Bang Si-hyuk does not enter into individual service contracts each time he provides producing to a label. The label first requests producing from Chairman Bang Si-hyuk, and then he provides it. A HYBE representative stated, “When Chairman Bang Si-hyuk produces, he receives copyright proportional to his participation share, so it is not subject to related party transaction requirements. Accordingly, it is also not subject to disclosure.”
In other words, the explanation is that Chairman Bang Si-hyuk provides producing services to the labels but does not receive payment for them. However, related party transactions are not limited only to cases where payment is made.
Regarding this, a Financial Supervisory Service (FSS) official stated, “Related party transactions are matters that must be disclosed. However, whether Chairman Bang Si-hyuk’s provision of producing must be disclosed can be determined during an accounting audit by examining whether it constitutes a related party transaction and whether it affects investors’ investment decisions. There are currently several complaints related to HYBE that we are reviewing. We have not yet initiated an accounting audit.”