SM Entertainment to be Sold Again? Kakao Considers Selling Most Subsidiaries
Kakao has decided to sell most of its subsidiaries, including SM Entertainment and keep only some core assets.
With the ‘judicial risk’ growing as founder and Kakao Management Reform Committee Chairman Kim Beom-soo is under investigation by the prosecution on charges of stock price manipulation, and public opinion worsening due to frequent split listing issues, Kakao is seeking a breakthrough by improving its corporate governance structure.
Kakao to Sell All but Core Assets
According to the information technology (IT) and investment banking (IB) industry on the 15th, Kakao has decided to sell most of its subsidiaries, including Kakao Games, Kakao Entertainment, SM Entertainment, and Kakao VX, and has begun looking for buyers.
Since last year, Kakao has been selecting external consulting firms and law firms to work on improving its corporate governance structure. The plan is to reorganize some of the businesses that have diversified through octopus-style expansion and focus on core strategic assets.
A Kakao official said, “We have decided to sell all assets except for the core platform businesses such as Kakao Talk, the internet bank Kakao Bank, and the webtoon platform Kakao Piccoma, which we have identified as future core businesses,” adding, “We have decided internally to start slimming down as public opinion worsens due to various investigations.”
Kakao Group Stocks Down 70-80% from Highs
Kakao is a leading domestic IT company and, along with its competitor Naver, has been classified as a representative growth stock in Korea. As liquidity released during the pandemic flowed into growth and technology stocks, it reached an all-time high of 169,500 won on June 23, 2021.
However, as public opinion worsened due to a series of ‘split listings’ such as Kakao Bank and Kakao Pay, the stock price began to decline. Last year, suspicions of price manipulation arose during the acquisition of SM Entertainment, and recently, criticism has grown both inside and outside the company, such as Kakao Mobility being accused of violating accounting standards.
Although Chairman Kim established an external organization called the ‘Law and Trust Committee’ to monitor management at the end of last year and took steps to strengthen responsible management, the stock price fell further as there was no real movement to improve management.
Kakao’s stock price fell to 49,000 won on the 16th, down 75.9% from its high. Stock prices of Kakao Pay (-88.7%), Kakao Bank (-76.9%), and Kakao Games (-82.6%) also fell by 70-80% from their highs. An IB industry insider said, “Kakao has taken steps to improve its corporate governance structure by selling off its subsidiaries, but external views on responsible management are cold,” adding, “More specific actions, such as Chairman Kim donating his personal assets, will be needed to save the company.”
Source: Naver
