[Into the Stocks] BlackRock Sold 1.03% of Kakao...

BlackRock, After Massive Stake Sale
Sudden Surge in Kakao Stock Price
Brokerage Firms Downgrade Kakao Target Price

[Asia Economy Reporter Junho Hwang] Even BlackRock, the world's largest asset management company, could not keep up with the volatility of Kakao. Holding a 5% stake in Kakao, BlackRock eventually sold off a large portion of its shares last month as Kakao's stock price plummeted relentlessly amid various negative factors.

However, on the 11th, Kakao's stock price surged, leaving BlackRock with no choice but to watch from afar. The securities industry expects the stock price to decline further in the long term, making the future direction of the stock price a point of interest.

Kakao's Stock Price Suddenly Soars

According to the Korea Exchange on the 14th, Kakao's stock price rose 15.55% on the 11th to 58,700 KRW. As of 9:27 AM on the 14th, it was trading at 59,600 KRW per share. This recovery in investor sentiment, which had been suppressed by fear, came after signs of easing inflation in the U.S. (October Consumer Price Index expected to be lower than forecast). Particularly, the largest net buying by foreign investors this month (21.3 billion KRW) drove the stock price up.

However, BlackRock's feelings watching this are expected to be complicated. On the 8th, BlackRock disclosed that it sold 1.03% of its Kakao shares. Having initially purchased 0.22% of shares at an average price of about 440,000 KRW per share on February 15 last year to reach a 5% stake, BlackRock revealed its presence but withdrew its expectations by selling off a large portion of its shares after 1 year and 8 months.

Kakao Falling Without a Bottom

[Image source=Yonhap News]

After BlackRock acquired its stake, Kakao's situation went in a different direction than expected. Various negative factors overwhelmed Kakao, and its stock price sank into a bottomless swamp. Early in the investment period, in April of the same year, Kakao became a "national stock" by splitting its common stock face value from 500 KRW to 100 KRW per share. Following the stock split, Kakao's issued shares increased from 88,704,620 to 443,523,100 shares. After trading resumed post-split, Kakao's stock price soared to as high as 169,500 KRW per share on June 23 last year.

But that was the peak. Kakao faced controversies such as the infringement on local businesses, leading to the complete abolition of Kakao Mobility's smart call service, and the so-called 'eat-and-run' controversy involving Ryu Young-jun, the Kakao Pay CEO appointed as Kakao's representative, after the listing. These issues caused the stock price to fall below 100,000 KRW from early this year. Subsequently, due to the U.S. tightening monetary policy and the resulting shortage of growth stock demand, the stock price continued to decline. Last month, Kakao's services went down, prompting investors to sell their shares. Kakao's stock price hit its yearly low last month at 47,300 KRW per share.

BlackRock apparently could not remain passive. It repeatedly bought and sold shares within a month to adjust the average price. The final trading price for Kakao shares by BlackRock was 55,257 KRW per share. Considering the stock split, the average price on February 15 last year when the 5% stake was disclosed was about 88,000 KRW per share, meaning BlackRock sold at a loss of over 30,000 KRW per share.

Securities Industry Lowers Kakao Target Price

Kim Beom-su, Head of Kakao Future Initiative Center, attended the comprehensive audit of the Ministry of Science and ICT and related audit target organizations held at the National Assembly on the 24th, and appeared to be thirsty during the audit and drank water. Photo by Yoon Dong-joo doso7@

However, the securities industry seems to support BlackRock's decision. Although the stock price surged suddenly, it is expected that Kakao will post underwhelming earnings even in the fourth quarter of this year.

Im Hee-seok, a researcher at Mirae Asset Securities, lowered the target price to 67,000 KRW, stating, "We have further reflected the impact of the fire incident last month by revising sales and operating profit down by 3% and 33% year-on-year, respectively. The normalization of the high-margin advertising segment will take relatively longer (4 days), making profitability deterioration inevitable."

Kim Hyun-yong, a researcher at NH Investment & Securities, also lowered the target price to 76,000 KRW, saying, "The growth rates of TalkBiz and content were lower than expected, so we need to lower expectations for Kakao's earnings." He added, "Although there is a sense that the trading range has been approached due to macroeconomic recovery expectations, a sustained rebound is unlikely."

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