[Into the Stock] 'Without Tea and Po'... Kakao Endures as '7Kao'

37.2% Drop This Year... Larger Decline Than KOSPI
Kakao Mobility Considering Selling 10% Stake
Accounts for 35.1% of Platform Revenue... Key Business
Stock Falls 2.3% After Officializing Stake Sale

[Asia Economy Reporter Hwang Yoon-joo] Kakao is suffering from the mobility sale issue. During the last three trading days when the KOSPI rebounded after a sharp drop, Kakao's stock fell by 2.3%.

According to the Korea Exchange on the 11th, Kakao's stock price dropped 37.2% from 114,500 KRW (January 3) to 71,800 KRW (July 8) this year. Its market capitalization also decreased by 39.2%, from 51 trillion KRW to 31 trillion KRW.

Compared to the KOSPI's decline rate of 21.06% during the same period, the difference is significant. Especially, while the KOSPI index showed a technical rebound by rising 2.19% over the last three trading days, Kakao fell 2.3%, receiving investors' cold shoulder.

The biggest cause is the Kakao Mobility sale issue. Kakao Mobility's business belongs to the 'Platform Others (Mobility, Makers, etc.)' segment. It accounts for 35.1% of platform sales, which is one of the two pillars of Kakao's business.

In particular, the business growth rate surpasses that of the Talk Biz segment (52.0%), which has the largest sales proportion. In the first quarter, the Platform Others segment's sales growth rate (52%) was more than twice that of Talk Biz (23%).

On the 7th, Kakao announced, "To enhance shareholder value and ensure the continuous growth of Kakao Mobility, we are considering converting to the second-largest shareholder through the sale of a 10% stake in Kakao Mobility." The official announcement of the sale of shares in the valuable Kakao Mobility business led to a stock price decline.

Kakao is in a situation where the sale of Kakao Mobility shares is inevitable. Last year, after facing commission hikes and neighborhood market infringement controversies, this year's sluggish stock market disrupted the listing plan.

On the 10th, a Porsche Taycan equipped with a mobile mapping system was exhibited at the tech conference "Next Mobility: NEMO 2022" held at COEX in Gangnam-gu, Seoul. Hosted by Kakao Mobility, this conference brought together global tech leading companies at the mobility tech conference NEMO 2022, where attendees could explore future mobility technologies such as autonomous driving and HD maps. Photo by Moon Honam munonam@

Financial investors (FIs) such as TPG and Carlyle hold 'tag-along rights,' so it appears that Kakao is considering selling only part of its shares rather than transferring management control. Tag-along rights allow FIs to demand the sale of their shares alongside Kakao when the business is sold.

Ebest Investment & Securities lowered Kakao's target price by 14.5%, from 117,000 KRW to 100,000 KRW. Sung Jong-hwa, a researcher at Ebest Investment & Securities, explained, "Due to the continued impact of the overall macro environment, concerns over second-quarter operating profit falling short of market consensus, and the plan to sell part of the shares of Kakao Mobility, one of the core platform subsidiaries, investor sentiment has weakened. Considering the shortfall in second-quarter earnings forecasts, we have revised down the annual earnings outlook since 2022."

In fact, Kakao's earnings forecasts are gradually being revised downward. According to FnGuide, Kakao's second-quarter sales this year are estimated to have increased by 36.48% year-on-year to 1.8455 trillion KRW, operating profit rose by 18.66% to 192.9 billion KRW, and net profit decreased by 37.03% to 198.9 billion KRW. Looking at the operating profit consensus over time, it has dropped from the 280 billion KRW range six months ago to the 190 billion KRW range.

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