Logos of Naver (top) and Mirae Asset Securities
South Korea’s top financial regulator has pledged to reexamine a deal involving technology giant Naver during a parliamentary audit, highlighting a relentless push for a nationwide tech crackdown.
On October 6, Financial Services Commission Chairman Koh Seung-beom said he would “examine the feasibility of the deal,” referring to a share-for-share exchange deal between internet giant Naver and investment bank Mirae Asset Securities made four years prior.
The pledge comes amid controversies that Naver founder Lee Hae-jin had been concealing his “white knight,” or ally, to get around a reporting regulation as a blockholder, so as not to fully unveil its voting power over the search engine operator.
The ruling Democratic Party of Korea lawmaker Rep. Lee Yong-woo claimed during the audit that Naver’s minority shareholder Mirae Asset must be counted as “joint holder” that forms a shareholder bloc with Lee, who now serves as Naver’s global investment officer.
According to the lawmaker, Lee of Naver was holding a 3.73 percent stake in Naver and has not submitted a regulatory filing to the authorities since 2018. Under Korean rules, a shareholder with ownership of more than 5 percent must file disclosures on a regular basis and in the event of a significant change in stock holding.
But Lee is still subject to the regulation, as Mirae Asset, which holds 1.7 percent stake in Naver, is apparently serving as a friendly shareholder to Lee, and therefore Lee should report Mirae Asset as a “specially related party,” the lawmaker argued. Otherwise, Naver is subject to the regulators’ penalties such as fines, restrictions on voting rights or orders to sell off shares.
The stock swap deal dates back to June 2017, when Mirae Asset bought Naver’s 563,000 shares in Naver, for 500 billion won ($420 million). In return, Naver purchased 47.4 million shares of Mirae Asset, amounting to a 7 percent stake, for the same price.
The filings then showed that Naver and Mirae Asset aimed to forge a strategic partnership for global expansion. The two companies also agreed to refrain from taking any actions to influence each other’s management.
The terms indicate that Mirae Asset is a white knight in the Naver founder’s bid to defend its management, according to Rep. Lee.
“Both companies have been increasing their clout over themselves through such partnerships,” Rep. Lee said.
Rep. Lee was formerly an investment banker and head of KakaoBank -- the mobile-only lender arm of Naver’s major rival.
Naver’s reported blockholders are the National Pension Service and BlackRock, according to a financial statement as of June.
Koh of the FSC responded to Rep. Lee that the deal has room for review, but expressed his views that Mirae Asset is unlikely to be seen as a joint holder with Naver’s founder.
The controversy comes as the latest revelation in the nation’s crackdown on tech giants here.
Earlier this week during a parliamentary audit, Kakao founder Kim Beom-su apologized over a series of controversies surrounding the company’s rapid expansion that has threatened mom-and-pop stores.
Kakao is in the process of a business transition in response to the public backlash. The company in September pledged to withdraw services affecting businesses of small merchants, such as those doing flower deliveries. It also vowed to create a fund of 300 billion won to support small businesses. The group’s de facto holding company, K Cube Holdings, has been under an antitrust probe for an alleged breach of fair trade rules.
As for Naver, Chief Executive Officer Han Seong-sook apologized Wednesday during the audit over cases of workplace bullying, which some have accused of having contributed to the suicide of an employee in May.
By Son Ji-hyoung (firstname.lastname@example.org)