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Suspected of manipulating SM stock price

South Korean prosecutors to arrest founder of IT giant Kakao

Recently, according to Korean media reports, Kim Beom-su, the founder of South Korean technology giant Kakao, is facing arrest for allegedly manipulating the share price of SM Entertainment during last year's acquisition process. Prosecutors have requested an arrest warrant for Kim Beom-su, who has denied the allegations, saying they are untrue, but is in deep trouble.

The controversy dates back to February last year, when Kim was suspected of manipulating Kim Beom-soo to invest 240 billion won (about 1.26 billion yuan) in SM shares to inflate the share price in order to hinder a takeover bid by rival HYBE. He was also suspected of failing to report his large holdings to financial regulators as required by regulations.This series of actions triggered a report from HYBE, which accused Kakao of manipulating stock prices.

According to reports, on March 7 last year, Kakao announced plans to publicly acquire 35% of SM Entertainment's shares at a price of 150,000 won per share, which is 25% higher than the 120,000 won per share proposed by the original shareholder Hybe in the public acquisition. Also on March 28 last year, SM Entertainment announced that Kakao and its affiliates already hold 40% of the company's shares, including the 35% stake recently acquired through a tender offer and the 5% stake previously held. Kakao thus surpassed HYBE and became the largest shareholder of SM Entertainment. (Review:)

In May this year, South Korea's antitrust agency conditionally approved Kakao's acquisition of SM Entertainment.

However, Kakao's former chief investment officer (CIO) Bae Jae-hyun was arrested by prosecutors on the same charge last November. Bae Jae-hyun was released on bail in March this year and is currently undergoing court trial. (Review:)

On July 9, the prosecution summoned Kim Beom-soo for questioning. Then, on July 17, the prosecution requested an arrest warrant for him for violating the Capital Markets Act.The arrest warrant review is scheduled for the 22nd.

In response to the allegations, Kim held an emergency team meeting with the CEOs of the CA Council's major affiliates on the 18th. At the meeting, he said, "I cannot explain in detail because the matter is still ongoing, but the allegations against me are untrue at this time." He added, "It is unfortunate to face such a situation when the team members are working together on management innovation and AI-based innovation. I believe the truth will eventually be revealed because I have never instructed or condoned any illegal activities."

Kim Beom-soo urged attendees to work harder to meet public expectations for reforms and fulfill their responsibilities as Korea's leading technology companies. "Although the situation is difficult, let's work harder to meet public expectations for reforms and fulfill our responsibilities as Korea's leading technology companies," he said.

Kim Beom-soo's legal team also said in a statement: "Kim Beom-soo has never issued any instructions or approved any illegal actions related to the acquisition of shares."

It is understood that the Capital Markets Act, which regulates South Korea's financial markets, is designed to protect investors from fraudulent activities such as stock manipulation. Violations of this act will be taken seriously and may be severely punished.

As legal proceedings continue, the outcome of the review of Kim's July 22 arrest warrant will be closely watched. The case has already affected public perception of Kakao and investor confidence.

It is worth noting that on July 17, Korean media reported that Kakao is currentlyPlan to sellGaming and entertainment divisions - most of its subsidiaries including Kakao Games, Kakao Entertainment, SM Entertainment, Kakao VX, etc.SM Entertainment, and has begun looking for acquirers.

This shows that the company will put more resources and energyFocus on core business, further enhancing its competitive advantage in the Internet service sector.

According to data, Kim Beom-soo's wealth mainly comes from the Kakao company he founded. His net worth once soared to tens of billions of dollars, making him the richest man in South Korea. However, with the decline in Kakao's stock price, his net worth has also shrunk significantly, but he still ranks high on the global rich list and has great economic power and business influence in South Korea.

However, the alleged stock market manipulation incident has dealt a severe blow to his reputation and status. If convicted, he could face severe criminal penalties and his business empire could be shaken.

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