Shares of JYP Entertainment, the Seoul label behind Stray Kids, closed 6.81% higher at 38,450 won on Tuesday, Oct. 27, after two little-known investment groups said they would seek up to half of the company. JYP says it never received a proposal, and South Korea's financial watchdog called the way the plan was announced highly unusual.

For investors in Asian media stocks, the episode tests how Korea polices takeover announcements made before any formal filing. The NEXROC Group, which calls itself a Japanese investment group and SVCV Inc. its cultural holding company, says it will move its headquarters from New York to Hong Kong in 2027, according to Music Business Worldwide. At a 30% premium to Monday's close, a 50% stake would cost roughly 830 billion won, while a U.S. filing in the group's name lists zero investors.

What NEXROC and SVCV Announced

In a press release sent to Korean media on Monday, Oct. 26, the two groups said they aimed to buy 25% to 50% of JYP's issued shares through a tender offer that could start as early as November, Yonhap News Agency reported. MTN and Music Business Worldwide put the target start date at Nov. 20. The groups said they were considering a price at a 30% premium to a reference share price, with the method for setting that reference and the final price to be decided later.

The plan, as described by Music Business Worldwide, is to send JYP a non-binding letter of intent and negotiate for about 30 days. The release itself said the offer had not begun, that the price and timing were not binding and that it did not mean JYP or its board backed the deal, MBW reported, citing Money Today.

Using Monday's close of 36,000 won, a 30% premium works out to 46,800 won a share. On that basis, MTN calculated, a 25% stake would cost about 415.8 billion won and a 50% stake about 831.6 billion won. JYP's market value at Tuesday's close was about 1.37 trillion won (around US$1.03 billion), according to Music Business Worldwide.

JYP jumped more than 14% in after-hours trading on Monday evening, then opened Tuesday up 6.53% on the Kosdaq and touched 40,900 won, a gain of 13.61%, before giving back part of the rise, Yonhap reported.

JYP Entertainment Denies Receiving an Offer

“We have not received any proposal regarding the acquisition of shares in our company,” JYP said on Monday, according to The Korea Herald. On Tuesday it formalized that position in a disclosure to the Korea Exchange.

The company went further on Thursday. In a press release, JYP said it had not received or reviewed any officially valid proposal, Yonhap reported. The bidder had said that day that it emailed JYP. JYP said the message failed sender checks under its security policy, was classified as blatant spam and was blocked before reaching the company, as its mail service provider confirmed, according to Yonhap. Yonhap's report did not include a response from NEXROC or SVCV.

Control is the key question. Founder Park Jin-young, JYP's chief creative officer, holds 15.37% of the company, or about 15.8% with related parties, according to Music Business Worldwide and MTN. A stake of 25% or more would make any buyer larger than the founder's group. NEXROC has not publicly said how it would fund an offer, Music Business Worldwide reported.

Regulator Urges Caution on NEXROC Plan

The Financial Supervisory Service said on Tuesday that it was closely monitoring trading in JYP and would quickly open an investigation if it suspected unfair trading, according to a Yonhap report. The regulator called it highly unusual to announce a tender offer by press release before filing a registration statement. Without that filing, it said, the bidder and its funds are hard to verify and the deal may never happen, and it urged investors to be careful.

Under Korea's Capital Markets Act, a bidder must file a registration statement with proof of funds, a capital markets source told Money Today, according to Music Business Worldwide. As of Tuesday, NEXROC and SVCV had not filed one.

A Form D filed with the U.S. Securities and Exchange Commission on Oct. 20 by NEXROC SVCV Inc., formerly SVCV Group Inc., listed a $50 million securities offering with zero investors and annual revenue of $1 million to $5 million, The Korea Herald and MTN reported. A September filing for $25 million also showed no investors. Money Today reported that Delaware records list SVCV Group Inc., which it called NEXROC's parent, as forfeited after its registered agent resigned, and that it found no NEXROC entity registered with Japan's tax agency or Financial Services Agency, Music Business Worldwide said. NEXROC's website says the group and its trade names are incorporated in Delaware, Japan and Guernsey.

The Herald noted that a 50% stake would cost more than 100 times the top of the revenue range the group reported, while adding that the figures alone do not prove its fundraising claims false. MTN said revenue alone cannot show a company's assets or its ability to raise outside money. Douglas Kim, an independent analyst who writes on research platform Smartkarma, told Reuters that tolerating such announcements “could set a bad precedent in the Korean equity markets,” Music Business Worldwide reported.

JYP's own results give bulls little to work with. Second-quarter revenue fell 15.1% from a year earlier to 183.1 billion won, and net profit dropped 40.3% to 21.7 billion won, according to Music Business Worldwide.

The 2023 contest for control of SM Entertainment ran through formal tender offers. HYBE's offer for an extra 25% of SM drew only 233,817 shares, and Kakao then offered 150,000 won a share for a 35% stake in a deal worth up to 1.25 trillion won. Regional investors have seen a similar formal process in the bidding contest for Japan's Kakaku.com.

NEXROC has also said it would launch tender offers for two listed life insurers, one in the United States and one in Australia, by Nov. 10. Money Today found that no listed life insurer had made a related disclosure to the Australian Securities Exchange, Music Business Worldwide reported. That Nov. 10 date, and whether a registration statement for JYP reaches Korean regulators before Nov. 20, are the next checkpoints for shareholders.