[Shaking Kiwoom]① "Brand Damage Inevitable Due to Stock Manipulation Allegations"... Poor Performance Adds to Misfortune

High Interest Rates and Financial Market Instability Lead to Deteriorating Performance of Kiwoom Investment and Kiwoom PE
Institutional Investors Say "SG Incident Shakes Kiwoom Brand... Negative Impact on PE and VC Qualitative Evaluations"
Former Chairman Kim Ik-rae's Eldest Son, CEO Kim Dong-jun, Faces Test of Crisis Management and Leadership Skills

Editor's NoteDespite the resignation of former Dowoom Kiwoom Group Chairman Kim Ik-rae, variables have emerged in the new business expansion roadmap of financial affiliates such as Kiwoom Securities, Kiwoom Asset Management, Kiwoom Investment, and Kiwoom Private Equity. As Ra Deok-yeon, CEO of Hoan, who was identified as the mastermind behind the stock price crash triggered by Soci?t? G?n?rale (SG) Securities, was detained, the intensity of investigations has increased day by day and public opinion has worsened, causing controversies related to Kiwoom Securities to persist. Amid high market volatility, Dowoom Kiwoom Group, which was actively planning new businesses to respond to liquidity instability, is now shaken by owner-related risks.

Former Dowoom Group Chairman Kim Ik-rae bows his head during a press conference on the afternoon of the 4th at the Kiwoom Securities headquarters in Yeouido, Seoul, regarding the recent stock price crash caused by Societe Generale (SG) Securities. Photo by Yonhap News

Kim Dong-jun, eldest son of former Dowoom Kiwoom Group Chairman Kim Ik-rae and CEO of Kiwoom Investment and Kiwoom Private Equity (PE), is not free from the impact of owner-related risks. A PE industry insider said, "The risks related to this incident directly affect the fund business," adding, "Investors are very anxious and may withdraw, which is a negative factor for fundraising."

Concerns from Institutional Investors such as Mutual Aid Associations

As the owner comes under prosecutorial investigation, investor anxiety is growing. A senior official from Mutual Aid Association A said, "The key issue is how much Kim Dong-jun was involved in the sales made by his father, former Chairman Kim Ik-rae," adding, "There will likely be some impact on PE or venture capital (VC) as well." A senior official from Mutual Aid Association B said, "The entire Kiwoom brand seems to be affected," adding, "Individual investors may not dwell on such risks for long, but since most investors in PE or VC are institutional investors, (the legal risks of major shareholders) are included in qualitative evaluations." He added, "There may not be a sudden 'fund run,' but problems could arise in fundraising or related areas."

Kiwoom Investment and Kiwoom PE Both Underperformed Last Year

Amid continued high interest rate burdens and financial market instability, Kiwoom Investment and Kiwoom PE recorded poor performance last year. With the market sentiment unlikely to reverse easily and former Chairman Kim under investigation by prosecutors and financial authorities, CEO Kim’s burden has grown heavier. Kiwoom PE posted a loss last year, and Kiwoom Investment’s operating profit decreased by 80% compared to the previous year.

Kiwoom PE recorded an operating loss of 12.7 billion KRW last year, its worst performance since its establishment in 2017. The main cause of the large loss last year was investment losses. As of the end of last year, Kiwoom PE had established a total of 13 private equity funds. Among these, 10 incurred equity method losses. The total amount of equity method losses reached 12 billion KRW.

Kiwoom PE recorded operating profits of 3.7 billion KRW in its first year, 2017, and 27 million KRW in 2018, but posted an operating loss of 2.5 billion KRW in 2019. It returned to profitability in 2020 with operating profits exceeding 10 billion KRW and surpassed 20 billion KRW in 2021.

Kiwoom Investment also recorded a poor operating profit of 2.5 billion KRW last year. After CEO Kim took office in 2018, Kiwoom Investment posted operating profits of 6.3 billion KRW in 2018, 8.2 billion KRW in 2019, 9.6 billion KRW in 2020, and 11.8 billion KRW in 2021. However, last year, amid a sluggish market, operating profit was cut to a quarter of the previous year’s figure.

Dowoom Data Block Deal Also Related to Management Succession Issues

There is a prevailing view that the management capabilities of 1984-born CEO Kim Dong-jun, who effectively became the new owner after completing the share succession, have yet to be fully verified. It is said that he has not shown remarkable growth in control or performance within the group. It is expected that Kim’s position will solidify further once the investment performance of funds raised in October 2021 and December 2022, during periods of abundant liquidity, becomes clear.

Kim began his investment career in 2018 as CEO of the group’s venture capital arm, Kiwoom Investment. He concurrently served as co-CEO of Kiwoom PE in early 2021 and became sole CEO in June of the same year after former Kiwoom PE CEO Yoon Seung-yong resigned. Kim’s dual roles in the two affiliates have attracted attention in connection with the Dowoom Kiwoom Group’s management succession. The sharp drop in Dowoom Data’s stock price, which triggered the SG Securities incident, broadly stems from the process of former Chairman Kim Ik-rae handing over group management rights to President Kim Dong-jun.

This incident is expected to be a test of CEO Kim’s crisis response and management capabilities. A senior official from a major financial company familiar with the VC industry described Kim Dong-jun as "a humble and hardworking guy who does his job well." A Kiwoom Group insider said, "Kim approaches employees first and pays close attention to details, so he has a good internal reputation." Meanwhile, Asia Economy made several attempts to contact CEO Kim Dong-jun to ask about Dowoom Kiwoom Group’s crisis response measures but received no response.

※This SG Securities-triggered stock price crash incident has sounded an alarm for the capital market order. Readers’ tips will be a great help in uncovering the truth. We welcome any tips regarding investment damage cases, suspicions of stock manipulation and asset concealment by Ra Deok-yeon’s side, details related to large-scale sales by major shareholders of Dowoom Data and Seoul Gas, or any other information (jebo1@asiae.co.kr). Asia Economy will do its best to establish a transparent capital market order.