Kakao, Embarrassed as SM Stock Acquisition Blocked... "Will Clarify Position After Internal Discussions"

Entertainment Business Expansion Setback... Kakao's Choice Draws Attention

Kakao could not hide its embarrassment on the 3rd as the court put the brakes on its plan to acquire new shares of SM Entertainment (SM), and began contemplating countermeasures.

Regarding the court's decision on that day, Kakao only released a brief statement saying, "We will organize our position through internal discussions and announce it." This means that they need time for internal arrangements such as understanding the specific details and background of the court's judgment and reviewing future response strategies.

In the platform and entertainment industries, attention is focused on what measures Kakao might take, as the court's decision has disrupted Kakao's plan to secure a 9.05% stake in SM.

There is a possibility that Kakao will launch a public tender offer for SM Entertainment shares using approximately 900 billion KRW in funds initially provided by the Saudi Arabian sovereign wealth fund and the Singapore Investment Corporation.

Since Kim Sung-soo, co-CEO of Kakao Entertainment, a Kakao subsidiary, recently expressed a strong willingness to invest in SM Entertainment shares by stating that all measures will be explored to maintain the partnership with SM Entertainment, this possibility cannot be ruled out.

However, there is also speculation that Kakao might completely abandon its plan to acquire SM Entertainment shares. Another view is that Kakao might focus purely on business cooperation by partnering with HYBE, which has become the largest shareholder of SM Entertainment.

Earlier, the Seoul Eastern District Court Civil Division 21 (Chief Judge Kim Yoo-sung) issued an injunction in favor of Lee Soo-man, former chief producer of SM Entertainment, who filed a provisional injunction to prohibit the issuance of new shares and convertible bonds by SM Entertainment.

As a result, Kakao’s plan to secure new shares worth approximately 111.9 billion KRW and convertible bonds worth approximately 105.2 billion KRW, thereby becoming the second-largest shareholder (with about a 9.05% stake), has been halted.