Kakao Shares Slump After Founder's Arrest Over Alleged Stock Rigging

By Kwanwoo Jun

Kakao Corp. founder Brian Kim has been arrested over allegations of stock-price manipulation during the acquisition of a K-pop agency last year, sending shares on their sharpest daily decline in nearly two years.

Shares of the South Korean mobile internet platform giant fell as much as 5.7% to 38,700 won ($27.89) early Tuesday, on course for their steepest daily decline since late 2022.

A Seoul court earlier at dawn approved an arrest warrant for Kim sought by prosecutors investigating the stock-rigging case, according to officials at the Seoul Southern District Prosecutors' Office. The court deemed Kim a flight risk, citing concerns about evidence destruction, they said.

The prosecution said Kim had been involved in manipulating the stock price of South Korean K-pop talent company SM Entertainment, then up for sale in February 2023, to frustrate its rival bidder HYBE, the label behind boyband BTS. Kakao later acquired SM Entertainment.

Kim has denied his involvement in the alleged stock manipulation.

Market analysts said that any criminal charges against Kim, who controls the operator of the country's largest messaging app, KakaoTalk, internet-based lender KakaoBank and many other affiliates, could delay investments in new businesses, including artificial-intelligence projects.

South Korean laws ban individuals convicted of financial crimes from owning a major stake in any financial institution.

Prosecutors plan to detain Kim for up to 20 days to conduct further investigations before bringing the case to court.

Kakao's stock price has fallen nearly 30% this year.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

July 23, 2024 01:43 ET (05:43 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.