JYP Entertainment Says It Has Received No Buyout Proposal as Regulators Warn Investors

South Korean music company JYP Entertainment told the Korea Exchange on Tuesday, October 27, that it has not received any proposal to buy its shares. The filing, which names Vice President and Chief Financial Officer Byun Sang-bong as the official responsible, came after two investment groups said they were considering a takeover bid. Music Business Worldwide reported the company's response.

The groups are NEXROC Group and SVCV, Inc. On October 26, they said they were considering a tender offer for between 25% and 50% of JYP's issued shares. A tender offer is a public bid to buy shares directly from shareholders at a set price. NEXROC is a Japanese group.

The two groups said they aim to start the offer on November 20, at a 30% premium to a reference share price. A premium is the amount above the market price, and the reference price is the baseline the offer is measured against.

Founder Park Jin-young holds 15.37% of JYP. A 25% stake would be larger than his own holding.

The share price moved sharply. According to the Financial Supervisory Service, JYP shares climbed as high as 44,000 won in after-hours trading on October 26, then fell as low as 36,150 won during the October 27 session. The won is South Korea's currency. The shares closed on October 27 at 38,450 won, up 6.81% from the previous day's close of 36,000 won.

South Korea's financial regulator, the Financial Supervisory Service, issued a warning to investors on October 27 about the proposed tender offer. It said it would promptly open an investigation if it suspected unfair trading. It also said it was watching closely for abnormal trading and for any breach of securities rules linked to JYP shares.

The regulator also pointed out that it is highly unusual to announce an intention to make a tender offer through a press release before filing a tender offer registration statement, the formal document that sets out the terms with the authorities. Without that filing, it said, it is difficult to verify the identity of the bidder and where its money comes from. It warned that the deal may not go ahead.

Korea Herald has reported doubts about the financial capacity of the Japanese investment group planning to acquire up to half of JYP.

What comes next depends on whether a formal registration statement is filed before the planned November 20 start. For now, JYP's position is that no offer has reached it, and the regulator's warning stands. Investors, who may be deciding whether to hold or sell, are being asked to watch the filings rather than the rumours.