South Korean prosecutors have taken action against Brian Kim, the founder of Kakao, a major internet company, for alleged stock manipulation involving a bidding war for SM Entertainment, a top music label in the country. This move comes after an investigation was launched into Kim’s role in manipulating the share price of SM Entertainment.
In 2023, Kakao and its subsidiary, Kakao Entertainment, emerged as the majority shareholder in SM Entertainment following a fierce bidding war with Hybe, the company behind the popular K-pop group BTS. Kakao offered to buy SM Entertainment’s shares at a significantly higher price than Hybe, leading to suspicions of stock price manipulation.
The prosecutors suspect that Kakao engaged in large-scale stock purchases of SM Entertainment’s shares, artificially driving up the price and causing Hybe to withdraw its offer. Kakao is also accused of failing to report these transactions to financial authorities, raising further concerns about its conduct.
Jae-Hyun Bae, Kakao’s chief investment officer, was arrested last year in connection with similar allegations of stock price manipulation. He is currently facing trial for his involvement in the matter. Additionally, the possibility of Kakao being forced to divest a portion of its ownership in Kakao Bank, its online banking subsidiary, looms if further violations of financial regulations are uncovered.
Kakao, established in 2006, is a prominent player in South Korea’s internet industry, offering a range of services including messaging, taxi hailing, online banking, music streaming, and webcomics. The company’s reputation and future prospects could be significantly impacted depending on the outcome of the investigation and any subsequent legal actions taken against its executives.
As the investigation unfolds, the tech world will be closely watching to see how Kakao navigates this challenging situation and whether it will be able to address the allegations of stock manipulation effectively. The case serves as a reminder of the importance of transparency and compliance in the financial markets, especially for companies operating in highly regulated industries like banking and entertainment.
