[Alpha Biz=(Chicago) Reporter Kim Jisun] Financial authorities raided the private office of Kakao founder Kim Bum-soo, head of the Future Initiative Center.

According to the investment banking (IB) industry on the 10th, the Capital Market Special Judicial Police of the Financial Supervisory Service sent investigators to Kim's personal office to secure internal documents and computer data related to the acquisition of SM Entertainment. The special judicial police confirmed the circumstances in which Kakao's top executives, including Kim, head of the center, were involved in the alleged manipulation of SM Entertainment's market price and conducted a search and seizure after obtaining a warrant from the court.

Kakao's alleged price manipulation of SM Entertainment shares erupted in February this year when Hive, which competed with Kakao for a stake in SM Entertainment, raised it. HIVE tried to buy SM Entertainment shares at 120,000 won per share at the time. However, SM Entertainment's stock price surged due to a mass purchase through a mysterious corporation, and Hive failed to make an open purchase.

In response, the HYBE filed a petition with the Financial Supervisory Service to investigate the abnormal purchase.

Financial authorities have been investigating Kakao's alleged market price manipulation since February this year. HYBE tried to publicly buy SM Entertainment shares for 120,000 won per share, but the stock price failed to exceed this. A decisive role in the rise in stock prices was the continued buying of 2.9 percent of the total number of shares issued by SM Entertainment through a mysterious corporation at IBK Investment & Securities' Pangyo branch on Feb. 16 during the open purchase period. HIVE then filed a petition with the FSS to investigate.

Kakao and Kakao Entertainment became SM Entertainment's largest shareholders by publicly buying some 8.33 million shares of SM Entertainment for 150,000 won per share in March this year, shortly after Hive's failure to make a public purchase.

Kakao said, "The buyers investigated by the FSS (February 16) have nothing to do with Kakao and Kakao Entertainment."

The financial authorities have been conducting a joint investigation with the prosecution by using the "fast track" process, saying, "If anyone tries to artificially keep the stock price above the public offer price in the open purchase process, he or she could be punished for market manipulation under the Capital Markets Act."

Financial authorities raided the offices of Kakao and Kakao Entertainment on April 6 and also raided SM Entertainment's headquarters in Seongsu-dong, Seoul, on April 18. On October 10, Kim Bum-soo, founder of Kakao and head of the Future Initiative Center (photo), also raided.

 

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