Kim Beom-soo's Arrest: Implications for Kakao, SM Entertainment, and the Korean IT Industry

Sheet Conversion of "SM Entertainment Stock Price Manipulation Allegations: In-depth Analysis and Impact Outlook after Kim Beom-soo's Arrest (July 23, 2024)"

1. Kim Beom-soo's Career Summary

YearKey Career

1997	Founded Kakao
2001	Launched KakaoTalk
2003	Launched Kakao.com
2010	Launched KakaoPage
2014	Founded KakaoBank
2015	Launched KakaoTalk Channel
2017	Launched KakaoM
2019	Launched KakaoPay
2020	Launched KakaoBrain
2021	Launched KakaoTalk Story
2021	Launched KakaoTalk Music
2022	Launched Kakao Contents
2023	Pursued acquisition of SM Entertainment
2024	Arrested on charges of stock price manipulation of SM Entertainment

 

Source: https://namu.wiki/w/%EA%B9%80%EB%B2%94%EC%88%98%28%EA%B8%B0%EC%97%85%EC%9D%B8%29

 

2. Timeline of SM Entertainment Stock Price Manipulation Allegations

2021 December:

• Kakao signs contract to acquire 65.33% of shares of SM Entertainment to secure control.

2022:

• February: Kakao proceeds with a tender offer to acquire control of SM Entertainment.
• February: HYBE Corporation competes for control of SM Entertainment.
• February: Kakao's stock price surges (above HYBE's acquisition price).
• March: Financial Services Commission launches investigation into suspected stock price manipulation of SM Entertainment.
• April: Financial Services Commission imposes fines on Kakao and SM Entertainment.
• July: Kim Beom-soo, Kakao's Supervisory Board Chairman, is indicted without arrest on charges of stock price manipulation of SM Entertainment.
• November: Kim Beom-soo, Kakao's Supervisory Board Chairman, is found guilty of stock price manipulation of SM Entertainment and sentenced to 2 years and 6 months in prison (suspended for 4 years and 6 months).

2023:

• June: Kim Beom-soo, Kakao's Supervisory Board Chairman, is confirmed guilty in the appeal.
• July: Kim Beom-soo, Kakao's Supervisory Board Chairman, is arrested.

3. Major Businesses Kim Beom-soo Pursued at Kakao

• Securing control of SM Entertainment: Strengthening K-pop content production and overseas market entry.
• Building a Kakao content platform: Expanding the content business by linking with KakaoTalk, KakaoPage, etc.
• Entering the metaverse: Developing virtual reality-based content and services.
• Strengthening fintech business: Expanding financial services based on KakaoPay and KakaoBank.
• Utilizing AI technology: Applying AI technology to content creation, service improvement, etc.

 

4. Stock Price and Outlook after Kim Beom-soo's Arrest

Stock Price Fluctuation:

• Before Kim Beom-soo's arrest: As of July 22, 2024, Kakao's stock price was trading in the mid-90,000 won range.
• After Kim Beom-soo's arrest: As of July 23, 2024, Kakao's stock price fell about 3.2% to 92,000 won.

Future Outlook:

• Short-term volatility is expected. There are still uncertainties surrounding Kim Beom-soo's arrest, and investor sentiment could be dampened.
• In the medium to long term, the stock price is expected to be determined by Kakao's business outlook and performance. If the growth trend of subsidiaries such as KakaoPay and KakaoBank continues and new businesses are successfully launched, the stock price is likely to rise.
• Investors should closely monitor the progress of Kim Beom-soo's arrest and Kakao's official position before making investment decisions.

5. Current Status and Outlook of Kakao Subsidiaries

Subsidiary2Q 2024 Operating Profit (KRW Billion)Key HighlightsFuture Outlook

KakaoPay	2,500	Maintains high growth momentum; Holds the top spot in the online payment market; Actively expanding overseas	Continued growth expected
KakaoBank	400	Shows improved profitability; Expected to continue growth through new customer acquisition and product diversification	Continued growth expected
KakaoPage	100	Exhibits improved profitability; Growth of webtoon and webnovel businesses expected to continue	Continued growth expected
KakaoM	50	Demonstrates improved profitability; Growth of drama and movie businesses expected to continue	Continued growth expected

 

6. Implications of the Arrest of Venture 1st Generation CEOs

• Strengthened legal regulations on venture company executives: There is a growing need for stricter supervision to prevent venture company executives from engaging in illegal activities during the fundraising process.
• Restoring investor confidence: Transparent management and a fair market environment are essential to regain investor confidence in venture investments.
• Concerns about the development of the IT industry: There are also concerns that excessive regulation of venture company executives could hinder the development of the IT industry.

7. Impact on the Korean Economy

• Short-term: The arrest of Kim Beom-soo could have a negative impact on the Korean economy by dampening investor sentiment and slowing down the growth of the IT industry.
• Medium to long term: The arrest could have a positive impact on the Korean economy by leading to transparent management and a fair market environment, which could promote sustainable growth.