"Help Us Exercise the Right to Defense," Appeals to the Court
Prosecution Refutes, "Representative Bae Is Maliciously Framing"
SM Stock Price Halved Compared to Acquisition Bid Period
On the 1st, Bae Jae-hyun, the CEO of Kakao who was arrested and indicted as the 'mastermind' behind the stock price manipulation allegations involving SM Entertainment (SM), pleaded with the court for bail permission.
At the bail hearing held by the 13th Criminal Division of the Seoul Southern District Court (Chief Judge Myeong Jae-kwon), Bae's lawyer argued, "According to the standards and criteria presented by the prosecution, under the unique shareholding structure of Korean corporate groups such as Samsung Electronics and SK Hynix, there is no way to defend management rights against hostile takeover attempts." He added, "Please allow bail so that the defendant can exercise the right to defense by resolving the non-detention status in advance, which would have occurred anyway."
In response, the prosecution rebutted, "The defense attorney assumes that the prosecution arrested the defendant based on a malicious frame." The prosecution stated, "There are countless materials and KakaoTalk messages containing wording about raising the stock price to cause HYBE's public tender offer to fail." They continued, "Even employees involved in actual stock trading were having such conversations, and after disputes during the detention review, an arrest warrant was issued."
Meanwhile, on the same day, witness examination was conducted for Lee Kyung-jun, Chief Financial Officer (CFO) of HYBE, who competed with Kakao in the shareholding battle during last year's 'SM acquisition war.' The CFO said, "Looking at the stock price trend, it rose significantly on February 16 last year and then showed a decline and stabilization, so I thought there was a large-scale accumulation issue on the 16th." He added, "If such large-scale accumulation had not occurred, we believed we would have succeeded in the acquisition without major problems, so to prevent such incidents from happening again, we submitted a petition to the Financial Supervisory Service to inform the market."
Kakao's SM stock price manipulation allegation case began in earnest after HYBE submitted a petition to the Financial Supervisory Service in February last year, requesting an investigation into abnormal purchases conducted through other corporations. According to the prosecution, CEO Bae, along with Kim Sung-soo, CEO of Kakao Entertainment, and Lee Junho, head of Kakao Entertainment's investment strategy division, conspired to manipulate the stock price by setting and fixing SM's stock price higher than HYBE's public tender offer price of 120,000 KRW. It is reported that approximately 240 billion KRW was invested in a total of 533 high-priced purchases.
During the acquisition battle, SM's stock price peaked at 161,200 KRW but continued to decline, closing at 74,300 KRW as of the 1st. This represents a 54% drop from the peak. The overheated atmosphere due to the shareholding competition has cooled down, and the recent emergence of the 'K-pop crisis theory' has continued to drive the downward trend.
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