NAVER Corporation (KOSE:A035420), a Korean tech giant facing pressure from the Japanese government to divest from the operator of the popular messaging app Line, has decided not to sell any of its shares, according to a senior presidential official on May 14, 2024 - at least not until July. 'After discussions with Naver, the company conveyed its stance that there will be no sale of its shares in LY Corporation (TSE:4689) in relation to the Japanese government's administrative guidance,' the official told The Korea Times. 'The government has accepted Naver's position and will ensure to protect Naver in a manner that prevents objections from the Japanese government regarding the company's decision." Naver has been facing pressure to divest its shares in the app's operator LY Corp., which is controlled by a 50-50 joint venture between Naver and Japan's SoftBank Group Corp.

(TSE:9984), after the Japanese government issued an administrative guidance to LY last month, aimed at reviewing its capital relationship with Naver following a massive data leak of user information last November. While the Japanese government has been denying that the guidance is about Naver's sell-down, SoftBank announced last week that it will initiate a review of its capital relationship with Naver, adding that it intends to make a decision by July. LY Corp.

is supposed to submit a report on its response to the guidance by July 1, and the report will not include details on the sell-down, the official said. The Korean government has been urging Naver to articulate its 'sincere and detailed position' on whether it will sell its shares or not, viewing the issue as a business matter between Naver and SoftBank. However, while Naver had refrained from expressing its clear stance in an apparent move to enhance its leverage in negotiations with SoftBank, the opposition bloc had accused the government of neglecting its duty to protect a Korean company from Japan's unfair claims. As the dispute shows signs of escalating into a political clash between Korea and Japan, the Yoon administration has been facing a dilemma between Seoul's desire for improved relations with Tokyo and growing skeptical public sentiment regarding issues related to Japan.

Even though another senior official at the presidential office said that 'the political conflicts over the Line dispute seem to be all settled,' it remains to be seen whether Naver will hold onto its shares even after July given that the explanations from the presidential office do not explicitly state that Naver has abandoned its plan to sell its shares in LY Corp. nor that the company's negotiations with SoftBank have concluded. Naver CEO Choi Soo-yeon said on May 3 that 'whatever decision the company makes, it will be based on the company's medium- and long-term strategy,' while its officials have been signaling that negotiations with SoftBank may not be concluded before July.

Reportedly, the company also agrees with the presidential office's statements that there will be no sell-down because of the Japanese government's guidance, but the company does not rule out the possibility of a deal later. When asked for confirmation, a Naver official repeated the company's previous statement that the company is 'in talks with SoftBank, keeping all options open'.