Nov 14, 2023 1 min read

Kakao exec indicted following the big battle with HYBE for control of SM

The Chief Investment Officer of South Korean tech firm Kakao has been indicted over allegations he sought to artificially inflate the share price of K-pop company SM while battling with HYBE for control of that business

Kakao exec indicted following the big battle with HYBE for control of SM

Prosecutors in South Korea have indicted the Chief Investment Officer of tech firm Kakao Corp in relation to alleged misconduct during the battle earlier this year for control of K-pop company SM Entertainment.

Bae Jae-hyun is accused of violating the country's Capital Market Act by purchasing over $180 million worth of SM stock in a bid to inflate the company's share price. He allegedly made that purchase as Kakao sought to fight off a rival bid for control of SM that had been mounted by that other big player in the K-pop business, HYBE.

A proposed alliance between Kakao and SM was supported by the latter company’s management team, but not its founder Lee Soo-man. He favoured the coming together of SM with HYBE.

However, HYBE ultimately abandoned its plan to acquire a controlling stake in SM when it became clear it was unable to compete with the offer being made by Kakao.

It then emerged in April that South Korea’s financial regulator had raided the headquarters of SM following a complaint made by HYBE to the effect that Kakao had manipulated SM’s share price during the two companies’ bidding war.

According to The Korean Times, the Seoul Southern Prosecutors Office has confirmed that "Bae Jae-hyun will stand trial on charges of inflating the price of SM Entertainment shares in violation of the Capital Market Act, with the intent to undermine a tender offer from rival bidder HYBE during the heated takeover battle in February".

Kakao Corp itself has also been indicted as part of these proceedings, while Bae and two other executives are accused of not reporting their stockholdings to regulators as required.

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