"Which Floor Are You On?" Kakao's 40,000 KRW Collapse and New Low Spark 'Retail Investors' Cries'

Management Risk Amid SM Entertainment Stock Manipulation Allegations

Kakao's stock price fell below the 40,000 won mark during trading, hitting a new low and causing an outcry among individual investors. Compared to surpassing 70,000 won in February this year, it has dropped by about 44% so far.

Bae Jae-hyun, Head of Investment at Kakao, is heading to the courtroom on the 18th at the Seoul Southern District Court in Yangcheon-gu to attend the pre-arrest detention hearing (warrant review).
[Photo by Yonhap News]

According to the Korea Exchange on the 20th, Kakao closed at 39,050 won (-3.58%) on the KOSPI market after six consecutive days of decline.

The consensus is that this is due to legal risks faced by the management. The investigation into the ‘SM Entertainment (SM) stock price manipulation suspicion’ has targeted Kakao’s top executives.

Judge Kim Ji-sook, in charge of warrants at the Seoul Southern District Court, conducted a pre-trial detention hearing for three individuals accused of violating the Capital Markets Act, and issued an arrest warrant the previous day for Bae Jae-hyun, Kakao’s Chief Investment Officer, citing "concerns over evidence destruction and flight risk."

He is suspected of investing about 240 billion won to interfere with the public tender offer by HYBE, the rival in the SM management rights acquisition battle in February, to raise SM’s stock price above HYBE’s tender offer price.

Additionally, the Financial Supervisory Service’s Capital Market Special Judicial Police (Special Judicial Police) notified Kim Beom-su, Kakao’s founder and former chairman of the board, to appear on the morning of the 23rd. The Special Judicial Police conducted raids on Kakao and SM in April, and later on Kim Beom-su’s office in August.

Kakao’s stock price reached its all-time high on June 25, 2021. At that time, it rose to 173,000 won during trading, ranking third in market capitalization on the KOSPI market after Samsung Electronics and SK Hynix.

Kakao Group stirred controversy over ‘dual listings’ by consecutively taking its subsidiaries such as Kakao Pay, Kakao Bank, and Kakao Games public in the IPO market.

Without finding clear growth drivers, the management’s stock sales sparked accusations of ‘exit scams.’ Amid this situation, the attempted acquisition of SM ended with the arrest of a senior executive.

Kakao is the second most invested stock among domestic stocks after Samsung Electronics. As of the end of last year, Kakao had 2,066,529 investors.

This content was produced with the assistance of AI translation services.