South Korean girl group aespa’s first regular album, ‘Armageddon,’ has achieved its highest-ever performance on the iTunes Top Albums chart, ranking in the top 25 in 25 regions worldwide, including the United States.
Another girl group, IVE, was the only K-pop artist named to the Forbes 30 Under 30 Asia 2024 list. Singer IU is currently on a world tour, performing in Hong Kong and Singapore. All of these artists are affiliated with Kakao Entertainment.
On May 15, HYBE became the first entertainment company in Korea to be designated as a conglomerate (a group of companies subject to disclosure) with assets totaling more than 5 trillion won ($3.6 billion). Attention is now focused on who will be next. If Kakao Entertainment goes public, it is estimated to be valued at 11.3 trillion won ($8.2 billion), surpassing HYBE’s current market capitalization of 8.34 trillion won ($6 billion) as of May 31.
Listing Kakao Entertainment has been a longtime goal for Kakao Group. In 2019, Kakao Entertainment selected KB Securities as its listing agent, which is still under contract. For Kakao, Kakao Entertainment is the only affiliate capable of achieving global reach and success. Kakao Entertainment has a wide range of businesses, including producing K-pop singers, actors, broadcasters, movies, dramas, YouTube content, webtoons, and web novels. The acquisition of SM Entertainment was a significant move for Kakao Entertainment.
SM Entertainment is a company that produces K-pop singers and manages broadcasters such as Jun Hyun-moo. It is involved in broadcasting and drama production through Mystic Story and Keyeast. It’s no secret that Kakao and HYBE fought fiercely to acquire SM Entertainment last year.
In the M&A market, the ‘winner’s curse’ refers to a phenomenon where a company’s business environment deteriorates after paying more than the actual value in a competitive bidding process. However, in the case of the SM Entertainment acquisition, both Kakao, the winner, and HYBE, the loser, are said to have suffered from the curse. Prosecutors are investigating Kakao for allegedly manipulating the market price, and HYBE took a loss and disposed of some of its SM Entertainment shares in an off-hours block deal. As a result, there are even jokes that say, “Both of them got sick trying to acquire SM Entertainment.”
Under these circumstances, it is unlikely that Kakao Entertainment will be listed in Korea soon. Judicial risks have not yet been resolved, and there is a controversy over the split listing. If Kakao Entertainment goes public now, it could create a conflict of interest with the shareholders of SM Entertainment, which is already listed.
Furthermore, Kakao Entertainment invested in Think Entertainment, the agency of singer Kim Ho-joong, who was involved in a drunk-driving incident. Additionally, it was revealed that Kakao Entertainment is the producer of the Netflix program The Influencer, which features cryptocurrency-related YouTuber Oking. While the show has yet to be released, significant damage could occur if Oking’s controversy is unresolved.
Given these challenges, a NASDAQ listing similar to Naver Webtoon’s might be the only viable option. Kakao Entertainment’s appointment of Kwon Ki-soo and Jang Yoon-jung as new co-chairmen earlier this year, is also seen as a strategic move towards achieving a listing.
Kwon is a financial expert who served as CFO during Kakao’s merger with Daum Communications in 2014 and oversaw financial and business strategy during the merger of KakaoPage, Kakao M, and Melon in 2021. Jang, who joined Kakao in 2021 from Sony Music Entertainment, reportedly has a U.S. network and is the head of SM & Kakao Entertainment America (SMKEA), the combined North American entity of SM and Kakao.
