Kakao Pay confirms IPO has been delayed

An unnamed user scans a QR code to proceed with a mobile payment using the Kakao Pay application. Courtesy of Kakao Pay

By Kim Yoo-chul

Kakao Pay has decided to delay its initial public offering (IPO), an investment banking source said Thursday. The move comes after Kakao and its affiliates lost over $15 billion in market capitalization this month alone as its stock price tanked due to the government's crackdown on the country's top messaging service operator.

"Kakao's top management reached a consensus to delay the IPO of Kakao Pay. The reason is simple. The country's anti-trust watchdog will continue scrutinizing Kakao and its affiliates, a negative factor in terms of setting an IPO valuation. Kakao Group needs to address the regulatory risk first before pursuing IPOs for its affiliates," a source involved with the issue said.

Kakao Pay sells a wide range of financial products and also offers customized insurance services via Kakao's messaging platform. If any monetary transactions occur inside Kakao's platform, financial companies pay commissions to the service providers. But this kind of business model was put on hold by the regulator who ordered big tech companies to obtain licenses to sell financial products.

Kakao Pay suspended its insurance services, but said its partnership with local insurers will remain intact through banner advertising. At the time of the suspension, Kakao Pay said it will strictly comply with the regulator's guidelines.

Financial regulators ordered Kakao Pay to correct its filing and lower its IPO target. Regulators said Kakao's original IPO price could mislead investors.

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"Kakao Pay will also delay the timeline of the prospectus for potential institutional investors, which had been scheduled for two days from Sept. 29. Now is not the right time to pursue the planned IPO," added the source on condition of anonymity. Kakao Pay officials could not be reached for comment.

After accepting subscriptions for its shares on Aug. 4 and 5, Kakao Pay earlier hoped to list on the country's benchmark KOSPI. It initially intended to raise as much as 1.6 trillion won by selling 17 million ordinary shares.

"Investors earlier hailed Kakao Pay's business models, but because the regulator is intervening directly in the early growth stages, Kakao Pay has to recalculate its target growth rates based on revised business models," said the source.

Kakao is the top shareholder of Kakao Pay with a 55 percent stake, followed by Alipay Singapore with 45 percent.

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