The first trial of Kakao founder Kim Beom-soo, accused of manipulating stock prices during the acquisition of SM Entertainment, began Sept. 11 at the Seoul Southern District Court in Yangcheon-gu, Seoul. The case, involving large-scale capital, is expected to take considerable time to resolve. Despite the legal uncertainty, Kakao is focused on organizational restructuring and finding new growth opportunities.
Industry and legal experts predict the trial will be prolonged, given the extensive evidence related to the 240 billion won ($180 million) stock manipulation charges. The proceedings are expected to stretch over several months, with multiple hearings and significant witness testimony.
Kim was indicted last year for allegedly manipulating stock prices to interfere with a public tender offer by rival HYBE during Kakao’s bid for SM Entertainment. Prosecutors allege Kakao spent 240 billion won in 553 separate stock transactions to artificially inflate SM Entertainment’s stock price. They aim to prove Kim’s involvement by summoning witnesses, including HYBE officials and individuals involved in the acquisition process.
Kakao denies the allegations, maintaining the stock purchases were legal and did not constitute manipulation. Kim’s defense team plans to argue that the prosecution has overstated the evidence and that there is no direct proof of Kim’s involvement.
If convicted, Kim is expected to appeal. The appeals process could introduce new evidence or legal arguments, further delaying the case. If the case proceeds to the Supreme Court, the entire legal process could last three to five years.
As the trial continues, Kakao faces pressure to maintain its business strategy. Industry analysts say the company must focus on developing competitive generative AI services and present a clear plan for long-term growth amid concerns about the “AI bubble.”
In response, Kakao has been working to minimize Kim’s absence through an emergency management system led by CEO Chung Shin-a. Over the past 15 months, the company has divested 23 non-core subsidiaries and shifted its focus to AI technology. Kakao is reorganizing its core services around KakaoTalk and plans to launch a separate generative AI service in the second half of this year, which is expected to be a key growth driver.
“Kakao’s strength in relationship-based communication will be combined with AI technology,” Chung said during the company’s second-quarter earnings conference call last month. “We plan to roll out B2C AI services and accelerate AI-driven innovation to make it a new core growth engine for Kakao.”
However, some industry experts warn that if the trial results in a conviction, the internal instability at Kakao could worsen. They point to the delays in large-scale investments and decision-making at Samsung after the arrest of then-Vice Chairman Lee Jae-yong as a potential scenario for Kakao.
“Korean companies are not structured for boards to operate with long-term plans,” said Kim Yong-jin, a business professor at Sogang University. “Without Kim, Kakao’s growth could stall. As we’ve seen with companies like Samsung and SK, ‘management from prison’ is virtually impossible, and without a leader, critical decisions are likely to come to a halt.”
