[Invest&Law] "SM Acquisition Is a Normal Procedure, Not Market Manipulation"… Kim Beom-su's Chief Secretary Hwang Tae-seon Claims in Court

Kim Beom-su, Chairman of Kakao Management Innovation Committee. Photo by Yonhap News

Kim Beom-su, Chairman of Kakao's Management Innovation Committee, denied all charges during a trial in which Hwang Tae-seon, Chief Secretary-level General Representative of Kakao CA Council, appeared as a witness regarding allegations of market manipulation during the acquisition process of SM Entertainment (SM).

The Criminal Division 15 of the Seoul Southern District Court (Presiding Judge Yang Hwan-seung) held a hearing on the 17th for Chairman Kim Beom-su, who was indicted for violating the Capital Markets Act, and conducted the witness examination of General Representative Hwang Tae-seon.

On that day, General Representative Hwang testified in detail about the operation method of the investment table and the decision-making process during the SM acquisition, stating, "The investment table proceeded by reaching consensus through the free expression of opinions by participants," and added, "There were cases where even if Chairman Kim Beom-su agreed, the process did not proceed, and cases where it proceeded despite his opposition."

In particular, General Representative Hwang claimed that Chairman Kim consistently showed a negative stance toward acquiring management rights of SM. He said, "Chairman Kim maintained the position of 'opposing hostile actions against the major shareholder's will' and disliked acquiring while fighting with HYBE."

General Representative Hwang also testified about the key decision-making processes surrounding the SM acquisition. He asserted that at the first investment table on January 30, key executives including Kim Beom-su, Hong Eun-taek, and Kim Ki-hong expressed negative opinions, and only after HYBE's hostile M&A declaration on February 24 was a consensus formed on the necessity of purchasing shares to maintain business cooperation. He said, "General Manager Bae Jae-hyun cannot decide on SM investment alone with Chairman Kim Beom-su," and added, "The multiple investment table meetings were due to continuous deliberations and changing circumstances."

Chairman Kim was arrested and indicted last August on charges of conspiring with entities such as One Asia Partners to manipulate the market price to obstruct HYBE, a competitor, from making a public tender offer during the SM acquisition process. He is also charged with violating disclosure obligations by failing to report to financial authorities despite holding more than 5% of SM shares.

HYBE attempted to publicly tender SM shares at 120,000 KRW per share at the time but failed as the stock price rose above 120,000 KRW. The prosecution suspects that Kakao manipulated the stock price by mobilizing 240 billion KRW to purchase SM shares 553 times.

Chairman Kim has been on bail since October 31 last year and is currently standing trial without detention. The court imposed bail conditions including submission of a written pledge, residence restrictions, payment of a 30 million KRW deposit, attendance upon summons, prior notification to the court for travel abroad or trips longer than three days, and prohibition of contact with witnesses or reference persons.

Reporter An Jae-myung, Legal Newspaper

※This article is based on content supplied by Law Times.