Kakao apologizes to shareholders for alleged SM stock manipulation
Kakao CEO Hong Eun-taek speaks during an event to celebrate the completion of a data center in Ansan, Gyeonggi Province, Sept. 26. Yonhap
Kakao, the nation’s dominant mobile messenger app operator, apologized Thursday for its involvement in alleged stock manipulation during its takeover of SM Entertainment.
In March, the mobile platform giant invested 1.39 trillion won ($1.06 billion) to acquire the entertainment firm. But Kakao has since faced public backlash after the scandal erupted. Financial authorities and the prosecution are now investigating the case.
In response, Kakao CEO Hong Eun-taek issued an apology for harming the interest of its shareholders.
“We are deeply sorry for arousing concerns to our shareholders, while Kakao was on track to acquire the management right of SM Entertainment,” Hong told investors during a conference call. “We are sincerely responding to any request for investigation from the judicial authority.”
The Kakao chief also pledged to conduct drastic reorganization within the firm, as part of realignment of its overall management framework and to reinforce its social responsibility.
“Kakao’s top priority for shareholders is to minimize its business risks,” he said. “We will keep carrying out the ongoing projects as planned, and carry out the reorganization after reflecting on our increased social responsibility in line with corporate growth.”
The message came ahead of the firm’s quarterly earnings announcement. Kakao reported an operating profit of 140.3 billion won between July and September, down 6.7 percent from a year earlier. Its net profit also extended a bigger loss of 63.9 percent during the same period. But the firm’s quarterly sales set a new high with 2.16 trillion won, up 16.3 percent from the previous year.
The company attributed the revenue fall to expanded spending on labor and investment in its artificial intelligence (AI) business.
The acquisition of SM Entertainment also helped Kakao attain an additional operating profit of 25.2 billion won in the third quarter.
“We will keep solidifying our business structure for sustainable growth,” a spokesman at Kakao said. “Kakao will also focus on getting back to the basics to offer more stable and safer services to our users.”
Kakao shares closed up 3.75 percent at 45,600 won per share, despite the weaker-than-expected earnings report.