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Kakao Pay IPO clouded by overhang, overvaluation issues

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KakaoPay CEO Ryu Young-joon. Korea Times file
KakaoPay CEO Ryu Young-joon. Korea Times file
By Lee Kyung-min

Kakao Pay, the payment subsidiary of IT giant Kakao Corp, is coming under stock overhang pressure, due to the possible release of up to over 37.12 million shares held by Alipay, an online payment platform operated by China's Ant Financial upon Kakao Pay's planned initial public offering (IPO) next month.

Overhang is whereby a sizeable block of shares released for sale leads to a steep decrease in the stock price, mostly triggered by institutional investors with a large holding.

A recent report by Kakao Pay showed that over 11.67 million shares and 2.22 million shares both held by Alipay will be locked up from sales for six months and one year, respectively, upon the IPO. The combined 13.89 million shares account for 10.65 percent of Kakao Pay's total shares.

They are part of over 51 million shares, or 45 percent, held by Alipay, following an equity financing of $200 million (235 billion won) from Ant Financial in April 2017.

Market watchers say Alipay could offload the remaining 37.12 million shares, immediately after the payment subsidiary's KOSPI listing.

This together with over 13.6 million shares to be publicly subscribed will lead to a plunge in the firm's share price, since they account for a combined 38.91 percent of Kakao Pay's total stock.

Further complicating the issues is the firm's overvaluation, a reason why the Financial Supervisory Service ordered a pricing revision and postponed approval of the firm's initial IPO plan in August until after September.

The revised publicly offered per-share price is in the range between 60,000 won and 90,000 won, down from 63,000 to 96,000 won.

The estimated amount raised from the public offering is expected to be at least 1.2 trillion won, or up to 1.53 trillion won. This will translate into a market capitalization of between 7.8 trillion won and 11.7 trillion won.

Kakao Pay will receive requests for public stock subscriptions from individual retail investors from Oct. 25 to 26, following book-building with institutional investors. It will be listed Nov. 3





Lee Kyung-min lkm@koreatimes.co.kr


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