Kakao Entertainment takes a hit from hit-and-run trot singer

Industry

Published: 29 May. 2024, 14:49 Updated: 29 May. 2024, 19:34

Kakao Entertainment takes a hit from hit-and-run trot singer

Trot singer Kim Ho-joong, center, attends a warrant review hearing on Friday for his alleged drunk-hit-and-run incident. Pictured left is Lee Kwang-deuk, co-founder and CEO of Kim's agency Think Entertainment, who was also summoned by police on charges of instigating an escape and harboring a criminal; on right is the agency's director, surnamed Jeon, who was charged with destroying evidence. [YONHAP]

Trot singer Kim Ho-joong has cost his agency’s shareholders, Kakao Entertainment and SBS Medianet, billions of won due to his drunk-hit-and-run incident.

Executives from his agency, Think Entertainment, benefited from the two firms’ early investment, but the label's future is now uncertain, making returns on investment unlikely. Think Entertainment said Monday that it will terminate the contracts of artists willing to leave, and that it would review its entire business.

According to data from the Financial Supervisory Service, CEO Lee Kwang-deuk owns a 28.4 percent stake in the company, Chairman Choi Jae-ho owns 29.7 percent, comedian Jung Chan-woo owns 28.3 percent, Kakao Entertainment owns 10 percent and SBS Medianet owns 3.6 percent.

The agency was co-founded by Lee, Choi and Jung in January 2018, with the three investing 33 million won ($24,000) each for a total of 100 million won in seed money. Lee, a comedian, is related to the trot singer.

Kakao Entertainment invested 7.5 billion won into Think Entertainment for 5 percent each of Lee’s and Jung’s shares to secure 10 percent in 2022 after the agency’s revenue reached 25.6 billion won that year on the back of Kim’s album and concert ticket sales. Based on market capitalization calculations, it is estimated that Kakao Entertainment valued the agency at 75 billion won.

Lee and Jung thus earned 3.75 billion won each from the sale, a significant jump from the initial 33 million won they invested in the company’s founding.

SBS Medianet bought 3.6 percent of shares from Choi in 2023. The company invested around 3.6 billion won, indicating a valuation of Think Entertainment at 100 billion won.

With Kim’s arrest, however, the agency will have to take the brunt of the damages. Following the drunk driving incident, the singer’s second date of the “World Union Orchestra Super Classic: Kim Ho-joong and Prima-donna" concert scheduled for May 24 and his “Tvarotti Classic Arena Tour 2024” concerts set to take place over June 1 and 2 in Incheon have been canceled.

The agency will have to refund concert tickets as well as cover penalties for the sudden cancellations. The agency received 12.6 billion won in advance payments for Kim’s scheduled performances, but only reported 1.6 billion won in cash reserves last year.

Kim has been charged for crashing into a stationary taxi and driving away while under the influence of alcohol on May 9 in Gangnam District, southern Seoul. His manager attempted to take the blame, but the singer turned himself in 17 hours after the incident. Kim also admitted to driving while drunk on May 19, after initially denying drunk-driving accusations for 10 days.

Police also applied for an arrest warrant for Lee on charges of instigating an escape and harboring a criminal and the agency headquarters' director, surnamed Jeon, on charges of destroying evidence.

Jung played screen golf with Kim on the day of the crash. His agency said the comedian did not join Kim for dinner and at the bar.

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]