KakaoPay IPO 'Halted'... Ant Group IPO Nightmare, Is China Risk Emerging?

[Asia Economy Reporter Ji Yeon-jin] As KakaoPay's listing on the Korea Exchange next month faces obstacles, the troubled IPO history of Ant Group, the parent company of China's largest payment app Alipay, is being revisited. This is because Ant Group's planned listing in China was abruptly halted last year, and now the listing of KakaoPay, in which Alipay has invested, may also encounter difficulties.

According to the Financial Supervisory Service's electronic disclosure system on the 12th, Kakao is the largest shareholder of KakaoPay with a 55% stake, and Alipay Singapore, holding 45%, is the second-largest shareholder.

Ant Group, the parent company of Alipay, was scheduled to list on the Shanghai and Hong Kong stock exchanges on November 5 last year, but the Shanghai Stock Exchange suddenly suspended the listing a day before. At that time, the funds Ant Group could raise through the IPO would have been the largest in history, amounting to $34.5 billion. This incident marked the beginning of comprehensive regulatory crackdowns on fintech companies by Chinese authorities, who have continued to target fintech firms up to recently.

The listing of KakaoPay, invested in by Alipay, is also expected to face setbacks next month. KakaoPay submitted its preliminary listing review application to the Korea Exchange on April 26 and received approval for the preliminary review on June 28 of the same year. To proceed with the listing, it must apply for a new listing by December 27 this year. KakaoPay submitted its securities registration statement on July 2, but the Financial Supervisory Service's request for corrections delayed the listing schedule once. Since KakaoPay submitted a corrected registration statement on the 31st of last month, if it submits another correction this time and the listing schedule is adjusted again, the preliminary review approval may be invalidated, potentially halting the listing within the year.

Recently, the Financial Services Commission announced that if online platforms like KakaoPay, which have been operating financial product recommendation and comparison services under the guise of 'advertising,' are deemed to be engaging in 'intermediation,' this would violate the Financial Consumer Protection Act effective from the 25th of this month. If KakaoPay's financial services (funds, loans, insurance) are blocked due to the Financial Services Commission's measures, its revenue is expected to decrease by nearly one-third. As of the first half of this year, these services accounted for about 32% (69.5 billion KRW) of total revenue. If major revenue sources are blocked, revisions to the expected revenue and public offering price in the securities registration statement will be necessary. The Financial Supervisory Service has stated that to protect investors, any violations of the Financial Consumer Protection Act must be reflected in the securities registration statement and is currently reviewing correction requests.

Some express concerns that even if KakaoPay succeeds in listing within the year as planned, future risks related to China may emerge. In fact, KakaoPay applied for a preliminary MyData license last December, but the approval was delayed due to the late confirmation of whether Ant Group, Alipay's parent company, was under sanctions by Chinese authorities, resulting in a suspension of asset management services for about three months.

According to the securities registration statement submitted by KakaoPay to the Financial Supervisory Service, after the public offering, Kakao's stake will be 47.83%, and Alipay's will be 39.13%. According to the shareholders' agreement between the two parties, the second-largest shareholder cannot own more shares than the largest shareholder without the latter's consent, and both the largest and second-largest shareholders have the right to recommend one non-executive director each to the board. KakaoPay listed as one of its key investment risks that "unpredictable situations related to the second-largest shareholder may arise in the future, which could impose restrictions on the company's business operations, so investors are advised to take note of this point."

This content was produced with the assistance of AI translation services.