Kakao met with small shareholders to discuss strategies for enhancing corporate value ahead of its planned spin-off.
On October 20, Kakao held a meeting with small shareholders at the FKI Tower in Yeouido, Seoul. This was the second communication session following an online meeting on September 16, featuring Kim Do-young, the designated CEO of KakaoX, Shin Jong-hwan, Kakao's Chief Financial Officer (CFO), and Jeon Hyun-soo, the Business Performance Leader, who addressed shareholders' questions.
Kim stated, "We believe that the spin-off will allow both companies to focus on their respective businesses and be evaluated independently, ultimately enhancing shareholder value. We expect the combined corporate value of KakaoAI and KakaoX after re-listing to be higher than it is now."
During the meeting, shareholders raised concerns that KakaoX might be undervalued post-spin-off, potentially leading to a decrease in the combined market capitalization of both companies. Questions also arose regarding the management's accountability if the actual benefits of the spin-off do not materialize and stock prices do not recover. The proposed split ratio is 64% for KakaoX and 36% for KakaoAI.
Kim clarified, "The split ratio reflects the distribution of shares based on net asset value, not the proportion of corporate value. The actual corporate value will be determined by the market after re-listing."
Questions about the possibility of a block deal involving Kakao founder Kim Beom-soo's shares were also addressed. Shin, the CFO, stated, "There will be no block deal," asserting that there is no need to worry about a loss of corporate value due to the spin-off.
The necessity of the spin-off was justified by citing inefficiencies in the current business structure, which manages advertising, commerce, and AI services based on KakaoTalk alongside subsidiary management and investment decisions. Post-split, KakaoAI will focus on consumer-facing AI services, while KakaoX will concentrate on nurturing subsidiaries and capital allocation to enhance competitiveness and decision-making efficiency.
Kakao reaffirmed its commitment to shareholder return policies aimed at enhancing shareholder value. KakaoX plans to return 30% of dividends and investment gains received from subsidiaries to shareholders, and intends to return approximately 300 billion won from after-tax investment profits generated by the sale of its stake in Dunamu. KakaoAI plans to increase its shareholder return ratio to a maximum of 40% based on the growth rate of free cash flow (FCF).
Concerns were also raised regarding the initial market response to the newly launched Kakao Membership, which has not met expectations. Jeon emphasized, "It is too early to judge the success of the service, as only three weeks have passed since its launch. The significance lies in establishing a foundation for connecting subsidiary services into a single paid membership." Kakao plans to expand benefits for advertising partners and link membership points to Kakao Commerce transactions to increase both advertising revenue and transaction volume.
Kakao is currently in the process of submitting additional materials regarding KakaoAI's business plans as part of the re-listing review by the Korea Exchange. Procedures with the Financial Supervisory Service will follow the exchange's review.
* This article has been translated by AI.
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