Kakao Pay, MSCI Inclusion Rumors Stir... "Selling Opportunity" [Click e-Stock]

Stock Price Plummets Due to Block Deal by Second Largest Shareholder
Increase in Circulating Shares from Block Deal
Higher MSCI Inclusion Probability Affects Stock Price
Opportunity to Reduce Holdings in an Era of Tightening

On the 3rd, officials who completed the KOSPI new listing ceremony of KakaoPay held at the Korea Exchange in Yeouido, Seoul, are taking a commemorative photo. From the left, Song Young-hoon, Deputy General Manager of the Korea Exchange KOSPI Market Headquarters; Ahn Sang-hwan, Chairman of the Korea IR Council; Jung Hyung-jin, Korea Representative of Goldman Sachs Seoul Branch; Lim Jae-joon, General Manager of the Korea Exchange KOSPI Market Headquarters; Son Byung-doo, Chairman of the Korea Exchange; Ryu Young-joon, CEO of KakaoPay; Kim Joo-won, Vice Chairman of Kakao; Jang Seok-hoon, President of Samsung Securities; Park Tae-jin, Head of JP Morgan Securities Korea; Jung Woo-yong, Vice Chairman of the Policy Committee of the Korea Listed Companies Association. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Junho Hwang] Contrary to KakaoPay's pre-listing statement that "there is no overhang from Alipay, the second-largest shareholder," KakaoPay's stock price has plummeted following Alipay's block deal on the 7th. However, as Alipay's shares are released into the market, increasing the number of circulating shares, there is speculation that KakaoPay could be included in the MSCI (Morgan Stanley Capital International) index. This is seen as a potential opportunity to recover from the second shock following the stock price plunge caused by the CEO's disposal of stock options immediately after listing, which was perceived as a 'mukttwi' (eat-and-run) shock.

Alipay's 'Block Deal'... KakaoPay Stock Price Drops from 106,000 KRW to 70,000 KRW Range

According to the Korea Exchange on the 15th, KakaoPay's stock price has been falling sharply since the 7th, dropping 15.57% in a single day. Over five consecutive trading days until the 13th, the stock price fell from 106,000 KRW to 76,400 KRW.

This was a reaction to news that Alipay had started a demand forecast for an institutional block deal of 5 million shares of KakaoPay (out of a total of 51.01 million shares). The discount rate was between 8.5% and 11.8% compared to the 106,000 KRW per share price on the 7th, and institutions rushed in due to the significant discount. Alipay still holds 34.72% (46.01 million shares) of the shares.

Alipay's block deal caused not only retail investors but also foreign investors and institutions to experience a literal 'mental breakdown.' Foreign investors sold a net 108 billion KRW worth of shares on the 8th alone and continued to sell 243 billion KRW over five trading days until the 14th. Institutions also conducted net sales of 6 billion KRW each on the 10th and 13th.

The impact also reached exchange-traded fund (ETF) investors. Yoon Jae-hong, a researcher at Mirae Asset Securities, stated, "Among all ETFs excluding leverage/inverse ETFs, the Korean internet industry theme ETF experienced the largest decline," adding, "The sharp drop in KakaoPay due to the major shareholder block deal, as well as declines in Kakao and Naver, influenced this."

On the 3rd, at the Korea Exchange in Yeouido, Seoul, Ryu Young-jun, CEO of Kakao Pay, is playing a drum at the ceremony celebrating Kakao Pay's new listing on the KOSPI. Photo by Kang Jin-hyung aymsdream@

Increased Possibility of MSCI Inclusion... Selling Opportunity

However, as Alipay's shareholding decreases, the circulating supply is expected to expand, raising the possibility of inclusion in the MSCI index. Following the block deal, the proportion of KakaoPay's circulating shares has increased slightly above the 15% hurdle required for MSCI index inclusion. Although KakaoPay was included in the KOSPI 200 index on December 9 last year, it was not included in the MSCI index due to a low circulating share ratio.

Kang Song-cheol, a researcher at Eugene Investment & Securities, said, "The circulating share ratio used for the MSCI quarterly review in August is calculated as of the end of July, so the increased liquidity ratio could be reflected in the index inclusion." He added, "If KakaoPay is included in the quarterly review on August 12, the estimated demand for index-tracking funds could be around 120 billion KRW."

As Kang mentioned, if KakaoPay is included in the MSCI index, it is expected to attract foreign investors' stock purchases and serve as a catalyst for a temporary stock price increase. Kang analyzed, "Given the ongoing decline in growth stocks due to concerns over inflation and tightening monetary policy in the short term, any stock price fluctuations caused by the possibility of MSCI inclusion could be a reason for reducing holdings."

However, he noted that the market capitalization, which has fallen since listing (closing at 10.204 trillion KRW as of the 14th), is still about 270 to 440 times the expected net profit of securities firms next year (23 billion to 37 billion KRW), making a significant rise difficult.

On the 3rd, attendees celebrated the commencement of trading at the Kakao Pay KOSPI listing ceremony held at the Korea Exchange in Yeouido, Seoul. From the left: Song Young-hoon, Deputy General Manager of the Korea Exchange KOSPI Market Division; Ahn Sang-hwan, Chairman of the Korea IR Association; Jung Hyung-jin, Korea Representative of Goldman Sachs Seoul Branch; Lim Jae-joon, General Manager of the Korea Exchange KOSPI Market Division; Son Byung-doo, Chairman of the Korea Exchange; Ryu Young-joon, CEO of Kakao Pay; Kim Joo-won, Vice Chairman of Kakao; Jang Seok-hoon, President of Samsung Securities; Park Tae-jin, Head of JP Morgan Securities Korea; Jung Woo-yong, Vice Chairman of the Policy Department of the Korea Listed Companies Association.
Photo by Kang Jin-hyung aymsdream@

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