When a 'competent person' reaches a certain

the pitfalls of a competent person
- The nature of the Hive vs. Adore dispute -

1. When a 'competent person' reaches a certain position, it is easy to fall into a kind of trap. It is the idea that the result of one's efforts will have a greater value than the invested capital. Fundamentally, this occurs because you only pay attention to the group return and do not think about the other person's risk.

2. There is no one to deny that CEO Min Hee-jin is competent. However, when it comes to the risks that Bang Si-hyuk and Hive have taken, everyone has different judgments. However, the scope of judgment between capital taking risks and creative directors in business is completely different.

3. For example, if we assume that a group called New Jeans fails, CEO Min Hee-jin only has to take business responsibility for the failure (including his position) and limited liability for his 20% stake. However, Hive is responsible for 80% of the stake, and it is compelling to think about the opportunity cost of the cash invested in New Jeans.

4. In other words, from the perspective of an entrepreneur who considers capital allocation, Newzins' failure does not end up as a simple failure, but it also leads to a change in capital allocation for the overall company's functions, and various additional risks that may arise from this, such as the departure of human resources, must be considered. This is the nature of financial risk and corporate management.

5. However, people who have demonstrated their expertise and competence in a specific field often think funny about "money" if it rises above a certain level. In fact, if you look at the grounds for the attempt to take over management rights of Adore, which Hive raised, you can't help but worry that Adore and Min Hee-jin thought this capital problem somewhat funny.

6. According to recent media reports, Adore received a valuation of about 2 trillion won in corporate valuation. It can be said that Hive has a value of 1.6 trillion won and CEO Min has a value of 0.4 trillion won. Here, it is interpreted that Adore attempted to dilute Hive's stake with a three-way capital increase, which means diluting the 80% stake of the majority shareholder with this three-way capital increase. It is not easy.

7. Assuming that the total number of shares of Adore is 100, Hive is holding 80 shares and Min Hee-jin is holding 20 shares, CEO Min has to raise at least 61 shares to lower Hive's stake to less than 50%. Assuming that the corporate value is KRW 2 trillion and that only dilutes the stake of both parties, it is 61/161=37.9%, so it is necessary to make a Majority Deal of nearly 40%.

8. But isn't it a question of how much value this 40% stake will come in with the issuance of all new shares? Even if it comes in at 2 trillion won, it's 750 billion won, and in the current interest rate situation, you can shoot that much cash, you have to endure the risk of breaking up with Hive, and in the current situation, the only human resources are New Jeans and Min Hee-jin, so who can afford all of this?

9. There is another technical problem. It will become clearer only after confirming the articles of association of Audore, but it is also a matter of general shareholders' meeting according to the articles of association, although the paid-in capital increase by three parties becomes a resolution of the board of directors. Even if both the board of directors of Audore is on the side of the representative of the people, if Hive stated in the articles of association that it was a matter of shareholders' meeting for control purposes when Adore was first established, what is the reason for Hive, who holds an 80% stake in the shareholders' meeting, to approve the matter of shareholders' meeting that damages his majority.

※ Of course, even if the Adore board of directors actually passed the three-way allocation bequest, the current Korean commercial law very strictly designates the requirements for the three-way allocation bequest, and disputes must have arisen at this point.

10. Representative Min may have thought that this deal was possible because 'I was competent and Newzins was successful'. However, whether or not to participate in Min Hee-jin's competence and third-party allocation bequest requires a completely different area of judgment. In media reports, A, an accountant, is constantly being discussed, and there is a possibility that he judged that something is possible in this area.

11. And even if this three-way allocation bequest is completed and Hive has been reduced to a minority share, CEO Min's stake will be lowered to 20/161 = 12.5%. If you thought you could control 49% of Hive and 37.9% of potential friendly shares in this situation, this can only be explained as his arrogance.

12. In the meantime, it can only be said that it is a bigger mistake to fall over the eyelet and claim that it was 'copyed'. What is the fault of the eyelet at this plate? They are only guilty of playing the concept and practicing as their creative director told them to. In what capacity does CEO Min brand his peer group as a fake by securing Newzins' future activities?

13. When you fall into the trap of your competence, you end up forgetting that it is the "characteristic of the market." The entertainment industry has a characteristic that the barriers to entry among large companies are low. The characteristics of idol groups are released to the public every day through video and music media, and especially in the case of concept, it is difficult to be treated as intellectual property rights, so if one succeeds, the follow-up groups pour out like a mushroom.

14. It is true that Min was successful in this environment. But because he was, what if he had a little more confidence? There may be some disappointment that a similar group came from within the same label, but it is difficult to fully replicate the uniqueness of New Jeans. New Jeans are simply New Jeans, so even if Eilit targets the next one, he is just No. 2.

15. However, in order to defend himself instead of being confident, he made the worst choice to brand Eilit as a fake, innocent of anything but hard practice. It may be the result of being immersed in what he has accomplished without having a clear idea of the characteristics of the market, confidence in his performance, or understanding of capital allocation.

16. How will this end? I don't know. But I'll wrap up with just one word. It's very ugly when adults who have achieved everything they have, put bomb vests on their juniors and fight each other in the media.

I just wish Newzins and Eilit not to get hurt.