Kakao’s founder cleared himself of handling SM Entertainment shares

Shares of conglomerate Kakao soared on Tuesday, October 21, 2025 following the acquittal of founder Kim Beom-su following a two-year investigation into alleged stock manipulation involving fellow pop culture titan SM Entertainment.

After falling to a one-month low on the Korea Composite Stock Price Index (KOSPI) on Friday ahead of the upcoming court ruling, shares of Kakao Corp shot up again to close at 62,300 Korean won (about $43.57), gaining 3,600 KRW (about $2.52) for a gain of 5.95% on the day.

Shares of KakaoPay Corp, a digital wallet and mobile payment service under the company, also rose on the KOSPI, jumping to KRW 53,100 ($37.14), gaining KRW 2,000 ($1.40), up 3.91%.

Meanwhile, shares of KakaoBank Corp (a financial institution focused on mobile banking services and financial technology) and Kakao Games Corp (a globally focused game publisher) also rose, up 3.34% and 2.84% on the KOSPI and Korea Securities Dealers Automated Quotations (KOSDAQ) on the day, respectively.

The stock’s rise is more welcome news for Kakao founder Kim Beom-su, who was acquitted of share price manipulation charges after his company eventually acquired SM Entertainment in a highly publicized battle with HYBE. In August, the prosecution had requested a maximum sentence of 15 years in prison for Kim.

Several former Kakao employees, along with Kim, were also acquitted, including Bae Jae-hyun (former head of investments), Kim Sung-soo (former CEO of Kakao Entertainment), and Hong Eun-tak (former CEO of Kakao). However, Ji Chang-bae, CEO of private equity fund One Asia Partners, was charged with embezzlement and breach of trust in the case and was sentenced to three years in prison with four years suspended.

In February 2023, Kakao signed an agreement to acquire new shares and convertible bonds from SM Entertainment, which would allow the company to secure approximately nine percent of SM’s shares for 91,000 Korean won (about US$63.66) per share at a discounted price. Acquiring the historic K-pop brand was a way for Kakao to become more competitive in the global music scene.

SM Entertainment’s stock soon began to rise in the coming days as Kakao faced obstacles: SM founder Lee Soo Man filed to suspend the acquisition of Kakao shares, while HYBE made a public offer to buy the shares at KRW 120,000 ($83.96), which was higher than the market price. The indictment alleged that Kim manipulated SM’s stock price by setting the purchase price above HYBE’s public offering to block a rival acquisition, leading to the founder’s indictment in August 2024.

However, the court ruled that the prosecution had failed to prove the allegations of market manipulation and that Kakao’s purchases were a legitimate effort to acquire shares.

“The mere fact that purchasing activities affected the market price cannot be considered market manipulation,” the court said, according to a report from Chosun Daily. “Even after reviewing the purchase ratio, timing and volume of Kakao’s orders, there is insufficient evidence to conclude that the orders were manipulative,” he said, adding that the stock is expected to rise even after the closing of HYBE’s offer. Having peaked near KRW 150,000 at its March 2023 high, SM shares suffered significant declines in 2024, but have since returned to their highs during the 2023 acquisition drama and remain high today, closing at KRW 119,600 ($83.65) on Tuesday.

The court also found that individual Lee Jun-ho, the former head of Kakao Entertainment’s investment strategy division, who testified that Kakao and One Asia Partners colluded to manipulate SM’s stock price, made false statements possibly under duress.

“Lee was investigated not only for this case, but also for unrelated matters where several warrants were issued, which put him under extreme psychological pressure,” the court said. “After a separate seizure and search, he recanted his previous statements and testified consistent with the prosecution’s allegations. . . . Lee sought to avoid investigation and expected that testing consistent with the prosecution’s allegations would lead to the closure of his case. After testing consistent with the charges, he applied for a leniency program and was not charged in this case. His clear motive and reason for testifying are false.”

Chosun Daily added that Lee was being investigated for breach of trust for “allegedly causing Kakao Entertainment to overpay for the acquisition of drama production company Baram Pictures”.

The prosecution said it would decide on an appeal after analyzing the verdict.

Looking ahead, Kim Beom-su and Kakao addressed what they saw as a sorry state of affairs for the company and focused on looking ahead.

“I sincerely thank the court for carefully examining the case for a long time and reaching this conclusion,” Kim said immediately after the verdict. “I hope this becomes an opportunity for Kakao to escape the shadow of accusations of stock price manipulation and market manipulation.”

The company also shared a statement saying, “The Kakao Group has faced numerous difficulties as a result of two years and eight months of investigation and court proceedings. It was particularly painful as we struggled to respond quickly to the rapid changes in the market. We will strive to make up for it and fulfill our social responsibilities.”

Looking ahead, Kakao Entertainment showcased upcoming releases from its subsidiaries such as Starship Entertainment (which will release Wonho’s first full-length album SYNDROME on October 31). SM Entertainment has a busy schedule until the end of the year, including TVXQ’s album release! member of U-KNOW on November 5th, the highly anticipated comeback of EXO’s chart toppers that were offered for December, as well as upcoming news from artists such as Red Velvet, NCT 127, NCT DREAM, WayV, RIIZE, TVXQ!, Max Changmin, Super Junior, Kyuhyun, Girls’ Generation, JungNewo, and N.Min. more.

Kakao Corp shares are up nearly 60% for the year. Shares of KakaoPay and KakaoBank are up 106% and 12.65% year-to-date, while KakaoGames Corp shares are down 2.8% so far.