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| Corporate logos of SM Entertainment and Kakao Entertainment / Yonhap |
By Lee Min-hyung
Kakao's rise to become SM Entertainment's second-largest shareholder will come as a boon for the nation's largest mobile platform operator, as its entertainment subsidiary is expected to generate synergy by using SM's intellectual property, analysts said Wednesday.
The analysis came shortly after an overnight decision by top management of SM, which sold its 9.05 percent stake to Kakao. Under the deal, Kakao secured 1.14 million common shares of the entertainment firm.
SM Entertainment founder Lee Soo-man expressed fierce opposition to the sale, saying that the move will "escalate a management dispute" against him. Lee holds a 19 percent stake in SM and is the largest shareholder of the company. He said he would hold SM's board of directors responsible for what he called an "illegal" decision by the firm's top management.
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| The interior of Kakao's headquarters in Seongnam, Gyeonggi Province, is seen in this file photo. Korea Times file |
Despite the dispute, SM Entertainment's share price soared by more than 9 percent, Wednesday, on hopes of business synergy between one of the nation's most renowned music agencies and the mobile giant. Kakao shares also closed with a gain of 1.62 percent during the same period.
Market analysts also expressed optimism over the stock deal, saying that both sides can benefit from each other's competitive edge in their respective business areas.
"Kakao Entertainment, a subsidiary of the mobile platform operator, will be able to expand its platform influence here and abroad if the company can take advantage of SM's systemic business processes and intellectual property," said Ahn Jae-min, an analyst at NH Investment & Securities. "SM will also benefit from Kakao's content-related value chain and metaverse capabilities."
Other analysts also forecast the stock prices of the two companies to enjoy a short-term rally.
"The dispute between Lee and SM's management shows signs of escalating following the latter's latest stock deal," said Kim Ha-jung, an analyst at DAOL Investment & Securities. "But as both sides still have not obtained large enough stakes to secure the firm's management rights, the competition is likely to heat up for acquiring more stakes, which will help boost the stock prices of the two companies."
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