South Korea's largest K-pop agency Hybe accuses sublabel executives of breach of trust

• The move comes after Hybe, which manages K-Pop sensation BTS, opened an audit into ADOR on April 22 over allegations that CEO Min Hee-jin sought to take the sublabel independent.
• ADOR CEO Min denied the allegations and accused Hybe of copying the concept of ADOR’s girl group NewJeans for another girl group under a different Hybe subsidiary.

The Hybe Co. headquarters in Seoul, South Korea on Feb. 19, 2023.

South Korea’s largest entertainment agency Hybe is set to file an official police complaint against executives of its sublabel ADOR on charges of breach of trust and other offenses.

The move comes after Hybe, which manages K-pop sensation BTS, opened an audit into ADOR on April 22 over allegations that CEO Min Hee-jin was aiming to take the sublabel independent. A Hybe statement sent to CNBC said the company also called for Min to step down.

Min denied the allegations and accused Hybe of copying the concept of ADOR’s girl group, NewJeans, for another girl group under a different Hybe subsidiary.

Hybe also told CNBC that it has substantial evidence that Min sought to seize control of the sublabel, stating that “the evidence included detailed discussions that Min has ordered the ADOR management to find ways to pressure HYBE into ultimately selling ADOR’s shares.”

A screenshot was also provided by Hybe of a message between Min and ADOR’s vice CEO. In the message, the vice CEO outlined various methods to take the label independent, including approaching other investors and convincing Hybe to sell its stake in the sublabel.

Hybe added that one of the audited parties “submitted information assets to seize the management of ADOR and to attempt to contact external investors. The auditee also admitted to creating the documents to attack Hybe.”

When the announcement of the audit broke Monday, shares of Hybe slid 8%, marking its largest fall in seven months. The stock was little changed Thursday.

Hybe holds an 80% stake in ADOR, with Min holding 18% and other executives splitting the remaining 2%.

The development also comes as NewJeans is poised to come back with a new single on May 24.

Hybe said it will continue to provide care for the group and support its upcoming comeback, as well as meet the members’ legal representatives to discuss how to protect the group.

Multi-label

The development is a blow to Hybe’s “multi-label strategy,” where the agency houses multiple independent labels to “ensure that a wide variety of music and content are created.”

This is in contrast to traditional K-pop agencies, which hold all their artists in the same stable and rely on a few major names for growth.

In a 2022 release, Hybe said that “we look forward to their growth through mutual cooperation and, at times, even healthy competition.”

Last year, Bernstein also identified this as one of Hybe’s strengths in an investor note. The revenue and growth from other sublabels allowed the company to make up for BTS’ hiatus due to South Korea’s mandatory military service, the firm said.

In contrast, shares of rival YG Entertainment fluctuated wildly after members of Blackpink did not re-sign their individual contracts with the agency.

— CNBC’s Chery Kang contributed to this report.