SM Entertainment acquires additional 11.4% stake in DearU for $9.2 mn

SM Entertainment Co., South Korea’s music powerhouse behind internationally popular boy and girl bands like EXO and aespa, has acquired an additional 11.4% in DearU Co., the local operator of a global pop artist-fan communication platform.

The entertainment management giant announced in a regulatory filing on Friday that it has purchased 2,711,351 shares, or 11.4%, of DearU for 50,000 won ($34) apiece, or 135.6 billion won in total.

After closing at 40,900 won on Friday, Kosdaq-listed DearU shares traded further down nearly 2% on Monday morning.

SM Entertainment took over 1,911,351 DearU shares from another major Korean entertainment company, JYP Entertainment Corp., and the remaining shares from DearU’s chief executive officer and other senior executives.

Following the additional stake purchase, SM Entertainment now owns a 45.1% stake in DearU, and the latter’s earnings will be reflected in the former’s consolidated earnings report starting in the second quarter.

The earnings inclusion is expected to improve SM Entertainment’s overall earnings, given DearU’s solid performance with 25.4 billion won in operating profit on 74.8 billion won in revenue in 2024.

After the latest stake purchase, the Korean entertainment powerhouse expects greater synergy between its global entertainment business and DearU’s fandom platform.

SM Entertainment plans to expand its intellectual property business by bolstering fan service platforms, said the company.  

PRIVATE CHAT SERVICE BETWEEN AN ARTIST AND A FAN

Founded in 2017, DearU operates a global fan communication platform, including Bubble, a mobile app allowing fans to chat directly with their favorite pop artists in a one-on-one chat room.

Launched in February 2020, Bubble is a paid service, meaning fans purchase a monthly subscription plan to communicate with their music idols.

DearU is set to launch Bubble in China in partnership with Tencent Music Entertainment Group (TME), China’s largest music platform company, in the first half of this year, raising expectations that the Korean company will enjoy tens of billions of won in additional revenue.

Such revenue growth is also expected to help SM Entertainment see about a 100 billion won increase in its consolidated annual revenue, said market analysts.

In anticipation that the deepened ties with DearU will improve SM Entertainment’s corporate value, Korea Investment & Securities Co. has recently revised the target price of SM Entertainment stock upward to 130,000 won from the previous 110,000 won.

SM Entertainment shares traded up nearly 2% on Monday morning, exceeding 107,000 won.

Write to Gyeong-Jin Min at min@hankyung.com

Sookyung Seo edited this article.