South Korean prosecutors are seeking a warrant to arrest Kim Beom-su, founder of tech giant Kakao, over alleged manipulation of SM Entertainment stock prices.
Today (July 17), Korea Bizwire reported that the Seoul Southern District Prosecutors Office has formally filed for an arrest warrant for Kakao founder Kim Beom-su. It comes a week after police questioned Kim over his alleged involvement in manipulation of SM Entertainment shares. The K-pop agency is home to popular acts such as aespa, NCT, Red Velvet and more.
A verdict on whether Kim is to be arrested has yet to be made. The court will determine the issuance for the arrest warrant after a hearing, per The Business Times. A spokesperson for the office confirmed that the arrest warrant was requested over charges related to the capital markets law, but denied to comment further.
On the other hand, a Kakao spokesperson denied the allegations levied against them in a statement to The Business Times, claiming that no illegal activities transpired during the company’s acquisition of SM shares at the time.
The investigation was launched amid suspicions that Kakao and its executives had rigged SM Entertainment’s stock prices in a highly publicised bidding war with South Korean entertainment giant HYBE last year. The latter is home to acts such as BTS, NewJeans, SEVENTEEN and more.
HYBE first acquired a 14.8 per cent stake in SM Entertainment from the latter’s founder, Lee Soo-man. The former later offered to purchase more SM shares from smaller shareholders at KRW120,000 (£66.64) per share, however ended up withdrawing their offers and halted its bid to acquire SM Entertainment after SM stock prices saw a significant jump.
Allegedly, SM shares were manipulated to be driven above KRW120,000 per share. After SM shares went up in price, Kakao Corp emerged as the largest shareholder of SM Entertainment,, acquiring a 39.87 per cent controlling stake in the label in total.
Prosecutors investigating the case are under the suspicion that Kakao had privately purchased KRW240billion (£133,734.70) worth of SM shares at prices above HYBE’s tender offer price on 553 occasions.
It is alleged that this occurred sometime between mid to late February 2023, in order to allegedly undermine a tender offer from HYBE amid the takeover battle for SM Entertainment.
Although no specifics or evidence has yet to be shared with the public, officials told South Korean press that Kim claimed to have been informed about plans to purchase SM shares, however denied any knowledge about specific procedures used to do so during his questioning last week.
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