[Exclusive] KakaoPay Delays Reporting Alipay Stake... False Explanation "Will Submit Upon Listing"

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[Asia Economy Reporter Ji Yeon-jin] It has been confirmed that Kakao Pay did not report the Alipay shares, in which it is the second largest shareholder, as foreign ownership when Alipay went public. This constitutes a violation of the foreign investment registration system and is grounds for cancellation of foreign investment registration. Kakao Pay submitted the report belatedly after this outlet began its investigation.

According to the Korea Exchange on the 11th, as of the previous day, Kakao Pay's foreign ownership ratio stands at only 2.39%. When Kakao Pay was launched in April 2017, it received a $200 million investment from Ant Group, which operates Alipay, and transferred 39.1% of its shares to Alipay Singapore Holdings. Alipay participated in Kakao Pay's paid-in capital increases in June last year and April this year, increasing its stake to 45%, but after the listing, the shareholding was diluted to 39.12%.

Since Alipay is a Singaporean corporation, its shares should be included in Kakao Pay's foreign ownership ratio under the foreign investment registration system. However, it was confirmed that Kakao Pay did not report Alipay's shares to the Financial Supervisory Service (FSS) from the listing on the 3rd of this month until the previous day. An FSS official stated, "Because Kakao Pay is newly listed, the listed company must report the stock status of its second largest shareholder, but since it did not report, it was not included in the foreign ownership." Including Alipay's shares, the foreign ownership ratio would increase to 41.51%.

The foreign investment registration system is designed to protect investors by monitoring foreign stock investment trends and to check foreign investment limits in public enterprises by requiring foreign investors to register their investments before investing in the domestic securities market. In Kakao Pay's case, there was significant attention on foreign investment trends due to concerns about overvaluation and the potential 'overhang' (large volume of shares that could be sold) related to Alipay's shares even before the listing.

The Enforcement Rules of the Financial Investment Services and Capital Markets Act stipulate that "a corporation newly listed on the securities market or a listed corporation merged with another corporation must promptly report the status of foreign stock acquisition of that corporation to the Financial Supervisory Service." Violation of this can lead the Financial Services Commission to order corrective measures or instruct the FSS to take necessary actions such as canceling investment registration.

Regarding the omission of Alipay's shares from the foreign ownership ratio, Kakao Pay initially expressed a position of grievance. A Kakao Pay official claimed, "The shares of Alipay Singapore Holdings are currently disclosed, and we submitted documents reporting the acquisition status of foreign corporation shares to the FSS at the time of listing in accordance with the Financial Investment Services regulations." Previously, on the 9th, Kakao Pay disclosed Alipay's 39.13% stake through a major shareholder stock change report.

If the report had been properly submitted as Kakao Pay claims, it would mean that the FSS did not accept the report. However, the FSS explained, "Kakao Pay's foreign ownership report was received last night (the 10th), and the disclosure of Alipay's shares through the major shareholder stock disclosure is a different regulatory mechanism when considering the foreign ownership ratio."

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