Kim Beom-su, the founder of South Korean tech giant Kakao Corp, was apprehended by authorities on July 23, 2024, facing accusations of stock price manipulation during the acquisition of SM Entertainment in February 2023. This development marks a significant turn of events for the company behind South Korea's most popular chat application.
Kakao Corp, established in 2010, has grown into a formidable tech conglomerate with assets valued at 86 trillion won ($62 billion). The company's rapid ascent has positioned Kim Beom-su as a key figure in South Korea's digital landscape.
The allegations against Kim stem from the company's efforts to acquire SM Entertainment last year. Prosecutors claim he was involved in manipulating the stock price to impede a competitor, Hybe, from acquiring the K-Pop agency. Kim has refuted these accusations, stating he neither ordered nor condoned any unlawful activities.
"We find this situation unfortunate."
The Seoul Southern District Court approved the arrest warrant, citing concerns over potential evidence destruction and flight risk. Kim is currently held at the Seoul Nambu Detention Centre, where he may remain for up to 20 days while prosecutors conduct their investigation.
This legal predicament could have far-reaching consequences for Kakao Corp. The company's plans to introduce new AI services in 2024 and expand internationally may face increased scrutiny and potential delays. Moreover, if Kim is convicted, it could jeopardize Kakao's control over its online banking arm, KakaoBank Corp, due to South Korean financial regulations.
The market has reacted swiftly to the news, with Kakao Corp shares closing down 5.4% on July 23, 2024, marking their most significant daily decline since December 15, 2022. The company's stock has already experienced a 24% decrease in 2024, reflecting investor concerns about the ongoing legal challenges.
As the investigation unfolds, Kakao Corp's CEO, Shina Chung, will lead efforts to minimize any management disruptions. The tech industry and investors alike will be closely monitoring the situation, as the outcome could significantly impact the future of one of South Korea's most prominent tech companies and its ambitious plans in the rapidly evolving field of artificial intelligence.