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| The headquarters of KakaoBank in Pangyo, Gyeonggi Province / Newsis |
By Anna J. Park
As the stock prices of key Kakao affiliates continue to plunge, employees at KakaoBank and Kakao Pay, who spent hundreds of millions of won to purchase their company's stocks when they went public last year, are suffering from snowballing losses.
The stock prices of KakaoBank and Kakao Pay have been falling to new lows for consecutive sessions lately. KakaoBank's stock price ended at an all-time low of 16,550 won ($11.56) on Thursday, down 6.76 percent. Kakao Pay's stock price also logged a record-low of 34,400 won, displaying a losing streak for seven consecutive sessions. Both companies' stock prices nosedived to less than one sixth of their value logged during the early months of their listing on the benchmark KOSPI last year.
The lackluster performances contrast starkly with what employees had expected at the time of their much-anticipated IPOs last year. At the peak of a liquidity-driven boom in the local stock market, employees were certain of the stocks' upward movements in the coming years, which led them to buy the shares when the companies went public, with a lock-up period of one year.
KakaoBank's employees purchased 12.7 million shares of the digital lender at 39,000 won, the initial subscription price for the IPO. The massive amount of shares accounted for nearly 20 percent of the total number of stocks available for the public offering. On average, a KakaoBank employee purchased 12,500 shares of their company's stocks with the one-year lock-up period, worth 490 million won. As of Thursday's close, the stock lost about 40 percent of the initial subscription price, resulting in an average loss of about 200 million won per employee.
While many of the employees have various stock options from the company, which would dilute the losses incurred from the stock purchases, not everyone is enjoying such financial benefits. An employee of KakaoBank criticized the company's management on Blind, an app that lets employees anonymously post comments about their employers, and urged them to come up with a clear vision and strategies to aid employees. The employee said many co-workers suffer from the fallout of the financial losses, experiencing various levels of personal crises. Seeing the dire situation, KakaoBank's management decided earlier this week to provide loans to aid employees who purchased company stocks.
Kakao Pay's situation is even worse than its banking affiliate. A total of 849 employees of the fintech payment firm purchased 3.4 million company shares at the time of KakaoPay's IPO in November last year. On average, an employee invested 360 million won to buy the stocks at a price of 90,000 won, which was the initial subscription price for the IPO, with a one-year lock-up period. Given that Thursday's closing price is less than 40 percent of the subscription price, each employee's average loss exceeds 200 million won.
Yet, as the payment company has yet to generate annual operating profits, the firm is not even think about providing loans to its employees. Instead, the company's management is reiterating the stance that it will strive to boost the stock price through various measures, such as key management members' buybacks of company shares.
Management's share buyback promise remains hollow
KakaoBank's management also undertook a share buyback. However, the move does not seem to have had a positive impact on the share price. Despite a recent share buyback of about 90,000 shares by KakaoBank's 12 key management members earlier this week, the internet-only bank's stock price continued to plunge. The bank boasted that the management members' share buyback represents their determination and responsibility over the bank's future growth.
But KakaoBank's management continues to face criticism for already reaping billions of won in profits as they exercised their stock options when the share price peaked last year. The bank's five key management members cashed in some 20 billion won last year in stock options.
Kakao Pay is not free from such criticism either. A total of eight Kakao Pay management members exercised their stock options to cash in 80 billion won within a month of the firm's listing on the KOSPI last year, resulting in the resignation of then-CEO Ryu Young-joon and a series of parliamentary moves to regulate unethical moves by management.
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