Kakao Group Founder Kim Beom-Su Gets Arrested - What's Next?

• As a result of the arrest of Kim Beom-Su, the near term impact on the Kakao companies (including Kakao Corp, Kakao Bank, Kakao Pay, and Kakao Games) is clearly negative.

• Given that this is a highly publicized event, it is likely that this legal case will be PROLONGED and finally decided by the Supreme Court which could take several years.

• Some of the scenarios include Kakao Group selling partial stakes in Kakao Bank and SM Entertainment but this is likely to get dragged on, resulting in further uncertainty.

Conclusion First

As a result of the arrest of the Kakao Group founder Kim Beom-Su, the near term impact on the main Kakao companies (including Kakao Corp, Kakao Bank, Kakao Pay, and Kakao Games) is clearly negative. Given that this is a highly publicized event, it is likely that this legal case will be PROLONGED and finally decided by the Supreme Court which could take several years.

Some of the scenarios include Kakao Group selling partial stakes in Kakao Bank and SM Entertainment but this is likely to get dragged on, resulting in further uncertainty. And for many global and local investors, uncertainty is one thing that they detest. Therefore, we expect further weakness in the major Kakao Group companies in the next 6-12 months.