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| Kakao's headquarters on Jeju Island / Yonhap |
By Lee Min-hyung
Kakao's huge stock fall is unnerving Korean retail investors, as major affiliates of the once-promising growth stock have been hit hard by global monetary tightening.
According to data from the Korea Exchange, Kakao and its three other major subsidiaries have extended losses of more than 30 percent this year. The combined market capitalization of Kakao, KakaoBank, Kakao Pay and Kakao Games reached 72.28 trillion won ($56.25 billion) on June 10, down by 33 percent from 108.24 trillion won as of the end of 2021.
Kakao is the nation's second-most beloved stock by retail investors, having purchased 13.2 trillion won worth of its stocks as of the end of March, data from the Korea Securities Depository showed.
The nation's most used mobile platform operator enjoyed an outstanding rally following the outbreak of the COVID-19 pandemic. Kakao shares soared to around 170,000 won last year but then lost momentum ― for growth ― after the global economy entered a cycle of monetary tightening amid growing inflationary pressure.
Kakao is considered one of the nation's major growth stocks. But with monetary authorities here and abroad making ever more hawkish movements, local growth stocks have failed to defend their prices in recent months.
The major brokerage houses here are also revising down Kakao's target price. Korea Investment & Securities recently presented Kakao's target price at 125,000 won, down by 13.8 percent from its earlier target, citing the overall stock falls of Kakao's overseas counterparts.
However, the securities firm did not expect major internet firms to be exposed to risks of additional stock falls due to the government's deregulatory stance.
"Kakao will become one of the biggest beneficiaries if the government eases restrictions on platform players," Jung Ho-yoon, an analyst at the brokerage house, said. "There stands a limited likelihood of internet firms suffering additional stock falls. Investors are advised to increase their investments in related companies."
Kakao Pay shares suffered a major fall last week when its second-largest shareholder ― Alipay Singapore Holding ― sold off five million shares in a block deal. The company closed at 85,100 won per share, down by more than 20 percent in four trading days last week.
Late last year, the company became mired in an ethical controversy after its top management engaged in stock selloffs. The company's former CEO, Ryu Young-joon, and a group of its other executives sold Kakao Pay shares worth 90 billion won by exercising their stock options for what many critics argued were undue profits. In response, Kakao Pay shares sharply declined at that time.
