The first appellate trial for Kim Beom-soo, head of the Future Initiative Center at Kakao, who was acquitted at first instance on charges of manipulating the stock price of SM Entertainment, and others will open at the Seoul High Court on the 24th. As prosecutors appealed, saying the first-instance court did not sufficiently assess the objective evidence, the appellate court is expected to again focus on whether Kakao's stock purchases were price manipulation aimed at blocking the tender offer.
The Criminal Division 4-1 of the Seoul High Court will hold the first appellate hearing at 3:30 p.m. on the 24th for Kim, the center head indicted on charges of violating the Financial Investment Services and Capital Markets Act, Bae Jae-hyun, former head of investments at Kakao, the Kakao corporation, Kakao Entertainment, and seven others. At a preparatory hearing in March, prosecutors and defense counsel organized the appellate issues and their plans for proof. Defendants are not required to attend a preparatory hearing, but attendance is the rule for a formal trial.
Kim and others are accused of using funds from Kakao and Kakao Entertainment in February 2023 to buy large amounts of SM Entertainment stock to hinder HYBE's tender offer, pushing the share price above the 120,000 won offer price. Prosecutors say Kakao concentrated its on-exchange purchases of SM Entertainment shares to derail HYBE's tender offer, causing retail investors to mistake the price rise for normal supply-and-demand.
Prosecutors are focusing on the transaction on Feb. 28, 2023, the last day of HYBE's tender offer. They have argued that Kakao injected large sums to buy SM Entertainment shares in a move that was price manipulation intended to peg the price above the tender offer level. Kim's side counters that purchasing SM Entertainment equity was a normal investment driven by managerial need and that there was no conspiracy to manipulate prices to block the tender offer.
In October last year, the first-instance court acquitted Kim and others. It found that even if Kakao's on-exchange buying affected SM Entertainment's share price, it was difficult to immediately deem it price manipulation aimed at blocking the tender offer. It also determined that the alleged conspiracy was not proven beyond a reasonable doubt.
Appealing the case, prosecutors argued the first-instance court did not sufficiently examine objective evidence such as messages and recorded calls of Kakao officials and related statements. In the appellate court, key issues are expected to include how Kakao perceived the possibility of a failed tender offer, whether the purpose of the large on-exchange purchases was managerial investment or price pegging, and the extent of Kim's involvement in the decision-making process.