Kakao asked One Asia Partners to purchase 100 billion won worth of SM Entertainment stocks in order to block Hybe’s public offering.

There is testimony that Kakao asked One Asia Partners to purchase 100 billion won worth of SM Entertainment stocks to block Hybe’s public offering.

The 15th Criminal Division of the Seoul Southern District Court, presided over by Judge Yang Hwan-seung, held a trial today for four individuals, including Kakao’s Chief Investment Officer Bae Jae-hyun and One Asia Partners Chairman Ji Chang-bae, on charges of violating the Capital Markets Act. The court conducted the first witness examination of Lee Jun-ho, head of Kakao’s Investment Strategy Division.

When the defense team asked, “Did former Kakao Chief Investment Officer Bae Jae-hyun tell One Asia Partners Chairman Ji Chang-bae to buy 100 billion won worth of SM stocks to disrupt the Hybe public offering?” Lee Jun-ho, head of Kakao Entertainment’s Investment Strategy Division, confirmed with a “yes.”

Lee Jun-ho stated that on February 10 of last year, he facilitated a call between Bae and Chairman Ji from Ji’s office using his cell phone. He explained, “Representative Bae asked Chairman Ji if he could buy SM stocks,” adding that the two were familiar with the details, so they got straight to the point. After some discussion, Chairman Ji agreed to help.

The division chief also mentioned that One Asia Partners was promised SM Entertainment and Kakao’s merchandise business if they bought the SM Entertainment stocks.

Chairman Ji is accused of colluding with Kakao to block a public offering by rival Hybe in the SM Entertainment acquisition battle last February. He allegedly mobilized 110 billion won in funds to buy SM stocks at high prices 363 times, manipulating the stock price.

Lee Jun-ho explained his repeated statements, saying, “I originally didn’t want to get involved in this, so I kept silent. But since I know everything, I felt I had to speak up.” He added, “At first, Chairman Ji explained that he was Sukidashi and that the prosecution’s target was Chairman Kim (Beom-soo).”

Meanwhile, the prosecution announced plans to summon Kakao founder and Chairman of the Management Reform Committee, Kim Beom-soo, for questioning as a suspect on the 9th.

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ANOTHER ARTICLE PUBLISHED THE ALLEGED FULL TESTIMONY

Kakao promised ONE ASIA PARTNERS SM's merchandise business in exchange of the stock purchase just to block HYBE's public offering

Last February, a key Kakao official testified in court that the private equity fund One Asia Partners purchased a large amount of SM Entertainment stock at Kakao’s request to block Hybe’s public offering. It was also revealed that Kakao had promised to hand over SM Entertainment and Kakao’s merchandise business in exchange for the stock purchase.

During the previous trial, Kakao denied any collusion with the private equity fund or involvement in stock price manipulation, claiming that “we purchased SM Entertainment stocks with the possibility of a future proxy battle with Hybe in mind.” At the trial for SM Entertainment stock price manipulation held on the 5th by the 15th Criminal Division of the Seoul Southern District Court, Lee Jun-ho, head of the investment strategy division at Kakao Entertainment, stated, "On February 10th of last year, when Hybe began its public offering, Kakao's then-CEO of Investment Bae Jae-hyun asked One Asia Chairman Ji Chang-bae to 'buy 100 billion won worth of SM Entertainment stocks.'" The division head is currently on trial along with CEO Bae, having been indicted on charges of stock price manipulation.

At the time, Hybe attempted to secure management rights by publicly offering SM Entertainment stocks (target stake: 25%, public offering period: February 10th-28th). However, it failed as the stock price rose above the public offering price of 120,000 won. It was later revealed that not only Kakao and Kakao Entertainment, but also One Asia had purchased large amounts of SM Entertainment stocks through their funds.

In his testimony, Lee stated that on February 10th of last year, he connected a phone call between Chairman Bae and Chairman Ji from his cell phone in Chairman Ji’s office. He explained, “When the public offering announcement by Hybe came out, in an urgent situation, Chairman Bae asked Chairman Ji if he could buy SM Entertainment stocks first,” and “100 billion won was mentioned as the amount. Chairman Ji said, ‘I will help you.’”

Lee also mentioned that there was talk of transferring SM Entertainment and Kakao’s merchandise business to One Asia in exchange for purchasing SM Entertainment stocks.

Furthermore, Lee stated that Kakao had mentioned repurchasing SM Entertainment stocks from One Asia. Regarding the stocks One Asia purchased, he said in court, “Chairman Bae said that Kakao would also participate in a public offering and assured me not to worry because he would buy the remaining amount through a block deal.” If true, this implies that Kakao disclosed important, undisclosed information to One Asia about their future public offering of SM Entertainment, which could be a violation of the Capital Markets Act.

Subsequently, One Asia purchased a significant amount of SM Entertainment stocks through its own fund, Havana 1, on February 16-17 of last year. On February 27, the last day of the public offering, they also purchased stocks through their affiliate, Graygo. Regarding the stock purchase that day, Division Chief Lee explained, “I received a call from Representative Bae saying, ‘The stock price has fallen and it is urgent. Tell Chairman Ji to buy as many stocks as he can.’”

Meanwhile, Representative Bae’s defense team refuted Division Chief Lee’s testimony during cross-examination, suggesting that his testimony might not be accurate. Lee is also being investigated by the prosecution regarding allegations that Kakao Entertainment purchased Baram Pictures, where his spouse is the largest shareholder, at an inflated price. In response to suspicions that he was cooperating with the prosecution, Lee denied the allegations, stating, “There was no such thing.”

In court, Lee said, “The Financial Supervisory Service conducted a search and seizure, and I was called in as a witness, which made for an uncomfortable and painful time.” He added, “Chairman Ji Chang-bae tried to comfort me, saying, ‘This is nothing special,’ and CEO Bae Jae-hyun said, ‘This is the Financial Supervisory Service being unreasonable. There is no problem.’”

Regarding the reason for changing his testimony during the prosecution’s investigation, he explained, “I stayed silent for a year, thinking the situation would soon be over. However, after being changed from a witness to a suspect and seeing the people around me suffer, it became difficult to endure, so I confessed the truth to the prosecution.”

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