Kakao's Loss of 20 Billion Won vs Kakao Shareholders' Loss of 2 Trillion Won... Tears of Retail Investors

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Kakao's market capitalization evaporated by 2 trillion won on the first trading day (17th) after the data center fire caused a service outage. Shortly after the market opened, nearly 4 trillion won disappeared. Although Kakao's estimated loss from the fire accident is around 20 billion won, the losses suffered by Kakao shareholders reached a staggering 2 trillion won, causing great distress among individual investors.

According to the Korea Exchange on the 18th, the market capitalization of Kakao group stocks (Kakao, Kakao Bank, Kakao Pay, Kakao Games) based on the closing price on the previous day decreased by 2.0561 trillion won. The total market capitalization of Kakao group stocks fell from 39.1661 trillion won on the last trading day before the fire on the 14th to 37.1099 trillion won based on the closing price on the 17th. Kakao (-5.93%), Kakao Bank (-5.14%), Kakao Pay (-4.16%), and Kakao Games (-2.22%) all closed down by 4-5%. During the trading day, except for Kakao Games, Kakao group stocks all hit new 52-week lows. The total market capitalization of Kakao affiliates, which was 39.1661 trillion won on the 14th, dropped by 3.693 trillion won with an 8-9% decline shortly after the market opened but slightly recovered in the afternoon.

In the securities industry, Kakao's loss from this fire accident is estimated to be around 20 billion won. KB Securities researcher Lee Sun-hwa said, "Based on the expected sales for the fourth quarter, the damage Kakao will suffer from this incident is about 22 billion won," adding, "Discussions on compensation for paid services are underway, so increased costs are inevitable."

However, the losses for Kakao shareholders are greater than Kakao's own losses. The stock price has already fallen about 60% this year, compounded by controversies over the 'split listing' and the fire accident. Kakao's stock price reached its highest point this year at 117,000 won on the first trading day of the year, January 3rd, and has since dropped by 58.68%.

Notably, Kakao ranks third among the most purchased stocks by individual investors this year. As of the first half of the year, it is known that 2.04 million small shareholders have invested in Kakao. According to the Korea Exchange, individual investors' net purchases of Kakao shares from the beginning of the year to the present amount to 1.9997 trillion won. Even on the trading day immediately following the fire accident, the 17th, individual investors net purchased 134.3 billion won worth of Kakao shares. Subsequently, individual investors also bought Kakao Bank (22.1 billion won), Kakao Pay (2.8 billion won), and Kakao Games (500 million won).

There are concerns that this adverse event exemplifies Kakao-style poor management and could impact Kakao's long-term growth potential. Jung Eui-hoon, a researcher at Eugene Investment & Securities, analyzed, "Virtually the entire nation experienced inconvenience due to this incident, and the brand premium of Kakao's various platform services has faded," adding, "Unnecessary brakes have been applied to the expansion of advertising and commerce sectors, causing setbacks in securing growth engines."

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