ADOR CEO Min Hee-jin reported to lose billions if HYBE proves a breach of trust amidst ongoing feud

HYBE Corporation's ongoing feud with ADOR CEO Min Hee-jin has taken a new turn as it has now come to light that the latter might lose billions if proven guilty of a breach of trust.

On May 1, 2024, the Korea Economic Daily reported that the ADOR shareholders' agreement provides HYBE with the authority to acquire all the shares of Min Hee-jin and other investors immediately from an authorized third party in the event of any breach by any party.

In the case of a call option, the purchase price per share is determined by taking 70% of the fair value and the lower nominal value per share which means Min Hee-jin would have to give up on her shares, take an 80% loss, and leave the company empty-handed.

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HYBE and ADOR's Min Hee-jin locking horns: More details about the ongoing tussle

The potential repurchasing of ADOR CEO's shares by HYBE has come to light due to the continuing legal dispute between the two parties about a purported takeover attempt. After reports surfacing online on May 1, 2024, regarding Min Hee-jin's alleged plan to seek termination of NewJeans' exclusive contract and to turn ADOR into a shell company to gain full control of management rights, the ongoing feud has taken a new turn.

For the unversed, a shell company is a business that serves as a front for the sometimes-illegal actions of individuals or other companies, but neither owns nor operates anything. In addition to being used to avoid paying taxes, launder money, and conceal the identity of their owners, such companies may also be used as a means of raising capital or assisting corporate mergers.

Meanwhile, the latest turn of events stated that Min Hee-jin would lose billions if HYBE proved a violation of contract (breach of trust) in court. Earlier, HYBE would have been required to shell out over KRW 100 billion (roughly $72.7 million) to acquire Min Hee-jin's shares in a typical situation. Now, they can acquire the shares at their face value if they can establish the breach.

For Min Hee-jin's shares, the purchase scale at par value is assessed to be KRW 2.80 billion (about $2.03 million), and for the management, it is expected to be KRW 3.20 billion (around $2.33 million). This suggests that Min Hee-jin, who purportedly had to borrow KRW 2 billion ($1.45 million), in order to buy 18% of the ADOR shares, would have to part ways with the business without any money.

Regarding NewJeans' contract termination, the girl group is currently bound by HYBE. Therefore if it decides to end the agreement, it will have to pay a penalty. The members' punishment might potentially exceed 300 billion won, especially because they still have around five years left on their contract.

To add context, earlier on April 22, HYBE filed a police report alleging that Min Hee-jin, the CEO of ADOR, had sought to spin off the label from the parent company in violation of an agreement.

HYBE initiated an audit after identifying indications of ADOR's endeavor to depart from the main corporation. It moved quickly to obtain access to the subsidiary's digital archives and computers, and reportedly personally interviewed personnel to collect first-hand accounts.

The parent company claimed that the information it had filed demonstrated that the CEO of ADOR had given the subsidiary company's management team instructions to put pressure on HYBE to sell its share of the subsidiary. Furthermore, with an 18% holding, Min Hee-jin is the second-largest shareholder in Ador, behind HYBE, which has an 80% stake in her company.

During a press conference on April 25, 2024, however, Min Hee-jin refuted the accusations, stating that HYBE had charged her after she had come forth with information on the purported copying of NewJeans' recipe to create ILLIT, a girl group that made their debut under HYBE's sub-label.

Dongha Ilbo reported HYBE's statement as given to South Korean media outlet News1:

"We will not respond individually to the war of attrition that seeks to reduce the illegal attempts to seize management rights to compensation-related disputes and retaliation frames. This matter is being handled in detail by CEO Min in order to seize management rights from Ador. It has already been revealed that this was planned, and the audit revealed that the whistleblowing that CEO Min claimed was also part of that."

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In other news, NewJeans released their latest single Bubble Gum on April 27, 2024, KST, after a long break of 9 months. They are also gearing up for their double track release, which includes How Sweet on May 24 and Supernatural on June 21.