"Monday Feared"... Kakao Plummets 67%, 'Fire Outage' Compensation Setback

Kakao Faces Various Adverse Factors Including Platform Regulation, Physical Division, and Listing Exit
Kakao Promises Compensation for Fire Damage at Pangyo Data Center

On the 16th, fire investigation officials from Gyeonggi Fire Department entered Building A of the SK C&C Pangyo Campus in Seongnam, Gyeonggi Province, where a fire had occurred. The fire broke out at the SK C&C data center around 3:30 PM the previous day, causing services of server tenants such as Kakao and Naver to go down one after another. In particular, Kakao services including KakaoTalk messenger, portal Daum, KakaoT, KakaoPage, and KakaoPay experienced widespread outages, resulting in a nationwide 'blackout situation' lasting over 10 hours. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Ji Yeon-jin] Kakao has been engulfed in concerns that its corporate value may further decline due to the fire at the Pangyo data center. Kakao's stock price had already dropped about 67% from its peak last year and about 53% from the beginning of the year due to the spin-off listing of its affiliates and the stock option sell-off scandal involving Kakao Pay employees. Now, with massive compensation expected from this fire, the situation has worsened.

According to the Korea Exchange on the 16th, Kakao closed at 51,400 KRW on the KOSPI market on the 14th, up sharply by 8.67% from the previous day. This rebound came five days after a new low, influenced by the announcement that Lionheart Studio, the developer of the mobile game "Odin," a key subsidiary of Kakao Games, would withdraw its initial public offering (IPO). On that day, all Kakao group stocks rose together.

Kakao's stock price soared to as high as 173,000 KRW intraday in June last year amid a domestic stock market rally but showed a steady decline after a sideways market last year. Coupled with government platform regulations, after the listing of Kakao Pay and Kakao Bank on the KOSPI market in the second half of last year, employees of these affiliates sold large amounts of company shares using stock options, facing criticism for "eoljuka" (stock option sell-off), which caused the stock price to plunge further.

Because of this, Kakao investors are on high alert to see if the data center fire will act as another negative factor. As of the first half of this year, the number of small shareholders in Kakao was counted at 2.04 million. Kakao said it would prioritize service recovery and promised sufficient compensation to users. Yang Hyun-seo, Vice President of Kakao, stated, "Once the service is restored, we will accept damage claims through legally notified channels," adding, "We will do our best to restore the service first and then provide compensation."

On the 16th, fire investigation officials from Gyeonggi Fire Department entered Building A of the SK C&C Pangyo Campus in Seongnam, Gyeonggi Province, where a fire had occurred. The fire broke out at the SK C&C data center around 3:30 PM the previous day, causing services of server tenants such as Kakao and Naver to go down one after another. In particular, Kakao services including KakaoTalk messenger, portal Daum, KakaoT, KakaoPage, and KakaoPay experienced widespread outages, resulting in a nationwide 'blackout situation' lasting over 10 hours. Photo by Kim Hyun-min kimhyun81@

In fact, Kakao's music streaming service Melon announced a compensation plan to extend the usage period by 3 days for Melon pass holders. Kakao Webtoon also stated, "Expired cash during the outage period will be granted with an additional 7-day validity period," and "Rental periods for episodes rented or expired during the outage will be extended by 72 hours." Kakao Mobility promised to provide compensation details later for taxi drivers using the Kakao T taxi calling service.

However, there are expectations that compensation may be difficult for free services such as KakaoTalk.

In 2018, KT took moral responsibility and provided compensation for communication disruptions caused by the fire at Ahyeon Exchange Station, even though the outage duration did not meet the stipulated time in the terms and conditions. At that time, KT paid up to 1.2 million KRW to 12,000 small business owners and offered a 1 to 6-month fee discount to individual customers depending on the extent of the damage.

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