Kakao Pay Requests Listing Review... Expected Value Up to 18 Trillion Won

Full-scale Steps for KOSPI Listing
Approval Expected by End of June if No Delays

[Asia Economy Reporter Kiho Sung] Kakao Pay has submitted an application for preliminary review for listing on the Korea Exchange's main board (KOSPI) in the second half of this year. With an expected corporate value exceeding 10 trillion KRW, it is anticipated to open the door to the IPO market in the second half and lead a successful debut.

According to the Korea Exchange on the 26th, Kakao Pay submitted the preliminary review application to the Exchange's main board headquarters on the same day. The usual review period by the Exchange is about two months, and if no delays occur, it is expected to pass the preliminary review by the end of June. Afterward, Kakao Pay will submit a securities registration statement and proceed to public subscription. Samsung Securities, Goldman Sachs, and JP Morgan are serving as lead underwriters for Kakao Pay's listing, with Daishin Securities participating as a co-underwriter.

Kakao Pay has attracted market attention due to its business model similar to Ant Group, which was expected to have an IPO of at least $35 billion (approximately 41 trillion KRW). Last year, China's Ant Group attempted a dual listing on the Hong Kong and Shanghai stock exchanges but failed. At that time, Ant Group's corporate valuation was estimated at $250 billion (approximately 289 trillion KRW). This high valuation reflected its growth potential as a global representative comprehensive financial platform that started with the payment service Alipay and expanded into investment, insurance, and loans. Kakao Pay's roadmap and business model follow a similar direction to Ant Group's and show comparable growth trajectories. Additionally, Ant Group is the second-largest shareholder of Kakao Pay.

Kakao Pay was spun off in April 2017 as Kakao's tech-finance specialized subsidiary. Starting with Korea's first simple payment service in September 2014, it has successfully established its platform by consecutively launching financial services such as investment, insurance, loans, and asset management. This year, it is promoting the launch of an MTS for domestic and international stock trading, establishing a digital non-life insurance company, and advancing the MyData business.

The platform's user base has also expanded significantly. Kakao Pay's cumulative number of subscribers is 36 million, meaning 4 out of 5 economically active people aged 15 and older use Kakao Pay. The transaction volume within the Kakao Pay platform is rapidly increasing as well. The annual transaction volume was 3.8 trillion KRW at the time of the spin-off in 2017, rising to 20 trillion in 2018, 49.1 trillion in 2019, and 67 trillion in 2020. This represents a 36.5% increase compared to the previous year and a 17.6-fold growth since the spin-off.

Along with the platform's growth, the revenue structure has greatly improved, and securities firms expect Kakao Pay to achieve profitability this year. Kakao Pay's revenue sharply increased from 10.6 billion KRW in the first year after the spin-off in 2017 to 69.5 billion in 2018, 141.1 billion in 2019, and 284.4 billion in 2020. This is more than double the previous year and 27 times the first year after the spin-off. Conversely, operating losses have rapidly decreased from a 96.5 billion KRW deficit in 2018, when significant investments began, to 65.1 billion in 2019 and 17.9 billion in 2020. The net loss in 2020 was 25 billion KRW, improving by about 62% compared to the previous year.

Kakao Pay's corporate value is estimated to be up to 18 trillion KRW. Recently, Jonghwa Sung, a researcher at Ebest Securities, projected that Kakao Pay is expected to structurally surpass the break-even point in operating profit this year and valued the company at 18 trillion KRW by applying a multiple of 0.18 times to the expected 2021 transaction volume of 100 trillion KRW.