SEOUL (Reuters) – South Korean tech large Kakao faces rising regulatory warmth after the nation’s president urged a evaluate into its taxi app amid complaints about monopolistic practices, which comes on the heels of a probe into suspected inventory market manipulation.

Shares in Kakao Corp, which operates Korea’s dominant chat app KakaoTalk and has expanded into digital banking, taxi providers and leisure, have dropped 27% over the previous three months, undershooting a ten.5% fall within the broader market and reflecting rising regulatory issues.

Analysts warn these troubles might worsen for the group, creating undesirable distractions simply because the agency seeks to push ahead on synthetic intelligence and infrastructure funding to compete with native rival Naver Corp.

“Kakao’s points seem to politicised past their important actuality,” mentioned Park Ju-gun, head of company evaluation agency Leaders Index.

“Its dominance within the nation make it a helpful topic to attract the general public’s consideration with earlier than common elections subsequent April.”

South Korean President Yoon Suk Yeol informed a public assembly on Wednesday that the market behaviour of Kakao Mobility’s taxi-hailing service was monopolistic and required a evaluate.

“Within the sense that they attracted (drivers) after which raised costs, it is very immoral and the federal government ought to take motion,” he mentioned in response to a criticism raised by a taxi driver over what he mentioned have been market abusing follow.

The president’s workplace didn’t elaborate on additional motion when requested by Reuters for remark. Kakao declined remark for the story.

Kakao Mobility, which holds greater than 90% market share of South Korea’s taxi-hailing market, mentioned late Wednesday it could maintain an emergency assembly with taxi drivers to reform the payment system.

Public issues concerning the group emerged a yr in the past when a widespread outage of KakaoTalk raised questions concerning the cellular chat app’s enormous market dominance and simply how reliant customers and companies have been on its associated providers.

Its regulatory troubles escalated final month when certainly one of its executives was arrested for suspected inventory market manipulation throughout its acquisition of Okay-Pop company SM Leisure.

Final week, regulator Monetary Supervisory Service (FSS) mentioned it should refer Kakao, its affiliate Kakao Leisure and executives concerned within the SM Leisure acquisition to public prosecutors for suspected violation of the Capital Markets Act.

If a court docket finds wrongdoing at Kakao Corp, the group may very well be pressured to divest a part of its 27.2% stake in on-line financial institution KakaoBank, as it could not be legally allowed to stay the financial institution’s main shareholder, in keeping with authorized specialists.

Including to these issues, state-run Nationwide Pension Service (NPS) mentioned on Wednesday it modified the aim of its funding in Kakao to 1 that entails extra lively train of shareholder rights from passive funding beforehand.

NPS declined to reveal particular causes for altering its funding objective. It held a 5.4% stake in Kakao, in keeping with the latest disclosure.

“Kakao’s sources are presently being divided alongside numerous authorized proceedings and probes by the prosecution, monetary regulator,” Samsung Securities analyst Oh Dong-hwan wrote in a be aware.

“It’s needed to concentrate to authorized dangers, as issues might come up within the standing of KakaoBank relying on the probes’ outcomes.”

(Reporting by Joyce Lee; Modifying by Miyoung Kim and Sam Holmes)

Copyright 2023 Thomson Reuters.

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