Brothers Facing the Cold Wind from KakaoPay

Eat-and-run scandal... Group stocks on the decline

[Asia Economy Reporter Lee Jung-yoon] Kakao Group stocks have faced strong headwinds since the beginning of the year. Following last year's controversy over Kakao Pay executives cashing out stock options, which led to a decline in the stock prices of all listed companies within the group, the stocks experienced significant drops during the January correction. Kakao Pay's market capitalization on the KOSPI surged to 13th place last year but has recently fallen to 20th due to continued poor performance.

According to the Korea Exchange on the 10th, as of the previous day, Kakao's year-to-date return was minus 23%. Kakao Games and Kakao Bank also fell by 20% and 25.22%, respectively. Kakao Pay dropped by as much as 28.33%. Compared to its all-time high of 248,500 KRW on November 30 last year, this is about half the value. On the 3rd of last month, it even hit a 52-week low of 117,000 KRW. This decline in Kakao Group stocks was driven by the controversy over Kakao Pay management's 90 billion KRW 'stock option cash-out' scandal, followed by recently announced poor earnings.

On the 8th, Kakao Pay held a conference call and announced a consolidated operating loss of 27.2 billion KRW for last year. This represents the largest operating loss, increasing by 9.3 billion KRW from 17.9 billion KRW the previous year. Considering that revenue and transaction volume increased by 61% and 48% year-over-year to 458.6 billion KRW and 99 trillion KRW, respectively, profitability improvement is deemed insufficient. Kakao Pay posted a brief profit in Q1 last year before turning to losses from Q2 onward, continuing a three-quarter losing streak. Particularly in Q4 last year, personnel expenses increased by 123% due to stock compensation costs, widening the deficit. Immediately after this earnings announcement, Kakao Pay's stock fell more than 3% the following day.

However, influenced by the overnight rise in the tech-heavy Nasdaq, Kakao Pay's stock price is rebounding. Kakao also saw a slight recovery, but Kakao Bank and Kakao Games turned downward during the trading session. Choi Kwan-soon, a researcher at SK Securities, explained, "In Kakao Pay's case, high growth is expected this year through the expansion of offline payment locations, entry into the MyData business, and the launch of Kakao Pay Securities MTS, which is anticipated to improve profitability." However, he added, "For a full-fledged stock price rebound, confirmation of profitability improvement is necessary, so we maintain a neutral investment opinion."

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