Is it possible for Min Hee-jin, former CEO of ADOR, to exercise the put option for ADOR equity valued at 27.8 billion won filed against HYBE?
This is a key issue in the third trial session of the lawsuit regarding the confirmation of the termination of the shareholders' agreement between HYBE and Min Hee-jin, held at the Seoul Central District Court's Civil Division 31 (Director General Nam In-soo) on the 12th.
Earlier, HYBE signed a business agreement with former CEO Min that included stock option payments shortly after the establishment of its subsidiary ADOR in November 2021. Subsequently, in March 2023, former CEO Min entered into a shareholders' agreement replacing the business agreement, demanding additional economic compensation following the success of the girl group "NewJeans."
Accordingly, HYBE transferred 20% of ADOR equity (including 2.2% held by former CEO Min's close associates) to former CEO Min, while granting a put option (with a multiple of 13 times) for 75% of that equity.
The shareholders' agreement stipulates mutual cooperation for the continuous growth of ADOR and establishes a duty of loyalty for Min Hee-jin at that time. In particular, it is said that no acts that could cause harm to ADOR and affiliated companies within the HYBE corporate group should be performed, and if such a contract is violated, it can be terminated.
Currently, HYBE claims that former CEO Min planned and executed the "NewJeans theft," alleging a violation of the shareholders' agreement. In contrast, former CEO Min's side refutes this, stating that there is no violation of the shareholders' agreement and that HYBE's procedures for terminating it are also unlawful.
Earlier, former CEO Min notified that the exercise of the put option, amounting to 27.8 billion won, is still valid as of November of last year. The condition for exercising the put option is calculated by applying a multiple of 13 times to the average of ADOR's operating profit over the past two years, multiplied by the ownership equity ratio.
The decision on whether former CEO Min's 27.8 billion won put option will be exercised depends on which side the court favors—HYBE or Min Hee-jin. If the court accepts former CEO Min's claims, she will be able to receive the 27.8 billion won put option.
However, if HYBE wins, former CEO Min's shareholders' agreement will be terminated definitively, and consequently, her rights to the put option will be lost. Conversely, HYBE also holds the call option to purchase all shares held by former CEO Min and others at par value (5,000 won) in case of a breach of the shareholders' agreement. HYBE exercised this option in September of last year, and if executed, former CEO Min would receive 2.8 billion won as the sale price of her equity.