SEOUL – The South Korean authorities have arrested Kakao’s chief investment officer for alleged stock price manipulation in a high-profile takeover battle over K-pop agency SM Entertainment.

Mr Bae Jae-hyun was arrested early on Thursday, according to the Seoul Southern District Court, which issued the warrant.

Internet giant Kakao won a controlling stake in SM after an intense bidding war with Hybe, the label behind hit boy group BTS. Financial regulators accused the executive, along with two others working at Kakao and Kakao Entertainment, of buying 240 billion won (S$242.6 million) in shares of SM in an attempt to disrupt Hybe’s tender. The court has not issued warrants for the other two people, and it was unclear whether there would be more arrests.

Both Kakao and Hybe had seen ownership of SM as a way to reach a broader audience and to drive South Korean entertainment acts into the mainstream, and their bidding war sent SM’s stock price to a record. Hybe backed down from its takeover bid in March.

The lawyer representing Kakao executives, who previously said the purchase of SM shares was a legitimate market transaction, was not immediately available for comment. Neither were Kakao officials.

Kakao shares fell around 2 per cent in morning trade, down around 23 per cent from the start of 2023. Shares of SM were down over 2 per cent, but still up 54 per cent so far this year. BLOOMBERG