K-Pop Industry At Crossroads: The Kim Beom-su Stock Manipulation Case and What It Means For Entertainment M&A

The South Korean entertainment industry is holding its breath as prosecutors seek a 15-year prison sentence and approximately $359,600 fine against Kim Beom-su, billionaire founder of Kakao, over allegations of stock manipulation in the high-stakes battle for control of SM Entertainment. The case represents far more than a corporate dispute—it’s reshaping how the K-pop industry will conduct mergers and acquisitions, and what constitutes acceptable competitive behavior in one of Asia’s most lucrative markets.

The Core Allegations: How Kakao Allegedly Outmaneuvered HYBE

At the heart of the controversy lies a claim that Kim Beom-su orchestrated an illegal stock-buying campaign to block HYBE’s (the company behind BTS, SEVENTEEN, and NewJeans) attempt to acquire SM Entertainment through a public tender offer priced at 120,000 Korean won per share. Prosecutors argue that Kakao Corp and its subsidiaries deliberately inflated SM’s share price through coordinated on-market purchases, ultimately securing majority control and generating approximately 240 billion Korean won ($172.6 million) in unjust profits for Kim and other participants.

The scheme, prosecutors contend, required Kim to deliberately conceal Kakao’s intentions from the public and market regulators while executing purchases designed to price out the rival bidder. When Kakao finally emerged as SM’s majority shareholder, the company’s Kakao Entertainment subsidiary—already operating multi-label music companies including Starship Entertainment, IST Entertainment (home to artists like Huening Bahiyyih), High Up Entertainment, Antenna, and EDAM Entertainment—significantly expanded its market control.

The Timeline: From Market Battle to Courtroom Drama

July 2024: Kim Beom-su arrested following an investigation into Kakao’s acquisition strategy.

August 2024: Formally indicted under South Korea’s Capital Markets Act, which specifically prohibits market manipulation and unfair trading practices.

August 29, 2025: Seoul court hears prosecutors’ case requesting maximum penalties. Kim maintains his innocence, stating in court: “Throughout my career, I have attended countless meetings, but not once have I ever approved anything illegal or considered it as part of our strategy.”

Kakao Entertainment has declined to comment on the ongoing proceedings.

Why South Korea’s Legal System Views This as Serious

Under the Capital Markets Act, stock manipulation crimes are calibrated to the financial gains involved. Typically, unjust gains exceeding 30 billion won (approximately $21.6 million) trigger sentences of seven to 11 years imprisonment. However, when prosecutors can demonstrate significant market impact, large-scale unfair trading activity, or particularly malicious methods, judges may increase sentences up to 15 years—precisely where prosecutors are positioning the Kakao case. This legal framework suggests authorities view the SM Entertainment acquisition as a systematic and deliberate violation rather than an isolated incident.

The Industry Stakes: What a Ruling Could Mean

The Seoul court’s decision will establish critical precedent on where the line sits between aggressive market strategy and criminal conduct. For the K-pop and broader entertainment sector, the outcome carries multiple dimensions:

Merger structuring: Global private equity firms and Korean entertainment companies are watching closely to understand how future bids for music catalogs and agencies must be disclosed and executed. If the court rules against Kim, future M&A transactions in Korean entertainment will likely face heightened scrutiny and more transparent bidding processes.

Kakao Entertainment’s future: The conglomerate has already signaled its commitment to the entertainment division by launching international boy band dearALICE in partnership with SM Entertainment and U.K. production company Moon&Back Media. A conviction could complicate these expansion plans and force strategic recalibration.

Kim’s influence: Despite stepping down from frontline management in March 2025 due to health concerns (he is reportedly undergoing early-stage bladder cancer treatment), Kim remains Kakao Corp’s largest shareholder with a 24.12 percent stake. Forbes currently ranks him as South Korea’s fourth-richest person with an estimated net worth of $5.1 billion. A conviction could fundamentally alter his business legacy.

Why This Matters Beyond The Courtroom

Kakao’s reach extends far beyond K-pop. The company operates Korea’s dominant messaging platform, banking services, gaming divisions, shopping platforms, ride services, and content streaming infrastructure—making it arguably the most integrated technology conglomerate in South Korean daily life. Kakao Entertainment’s music division doesn’t only manage its own artists; it also serves as a distributor for independent K-pop agencies not affiliated with Kakao, giving it outsized influence over which artists reach both domestic and global audiences.

The 2021 licensing dispute between Kakao and Spotify—which temporarily removed music by IU, Monsta X, MAMAMOO, Epik High, and other major acts from the world’s largest streaming platform for 10 days—demonstrated how much market power Kakao wields. The SM Entertainment acquisition further consolidated that position.

Kakao Entertainment’s Current Portfolio

The company’s multi-label structure now encompasses:

• Starship Entertainment: Monsta X, IVE, WJSN, CRAVITY, and others
• IST Entertainment: VICTON, ATBO, and Huening Bahiyyih (member of Kep1er)
• EDAM Entertainment: IU and WOODZ
• High-Up Entertainment: STAYC and Black Eyed Pilseung
• Antenna: Lee Hyori, You Hee-yeol, and multiple emerging acts

This consolidated structure creates significant synergies, allowing Kakao to leverage its ecosystem of messaging, banking, gaming, and shopping platforms to promote and monetize music content across multiple touchpoints.

Market Response and Looking Ahead

On Friday, August 29, Kakao Corp’s stock declined 1,000 Korean won (approximately $0.72), closing down 1.57% for the day and 2.95% for the week. Despite the legal uncertainty, Kakao’s stock remains up nearly 67% year-to-date following a summer rally, suggesting investors are not panic-selling based on the prosecution’s sentencing request alone.

The Seoul court now faces a decision that will ripple across the K-pop industry, the broader Korean technology sector, and international entertainment M&A practices. The verdict will either validate Kakao’s acquisition strategy as aggressive but legal competition, or establish that protecting fair market access to premium entertainment assets requires criminal penalties for billionaire-led enterprises. Either way, the ruling will define acceptable boundaries for tech conglomerates seeking to consolidate control over cultural IP in one of the world’s most competitive entertainment markets.