Kakao Drops 110,000 Won... Trusting Content to Move Forward

Foreigners and institutions sell together, causing hesitation
First drop to 100,000 won range since face value split
"Content industry boom continues... Sufficient growth momentum with US market entry"

[Asia Economy Reporter Minwoo Lee] Due to consecutive sell-offs by foreigners and institutions, Kakao's stock price fell into the 100,000 KRW range for the first time since its stock split. However, with earnings still expected to remain solid and clear growth trends in the content-related sector, analysts believe there is sufficient momentum for an upward trend.

According to the Korea Exchange on the 14th, Kakao closed at 109,500 KRW the previous day. During the trading session, it even dropped to 108,000 KRW. This is the first time Kakao's stock price has fallen below 110,000 KRW since the stock split on the 15th of last month. While Kakao had shown relatively strong stock performance compared to NAVER, another leading internet platform stock, it ultimately fell more than 3% that day, breaking the 110,000 KRW level. As of 11:17 AM that day, the price had dropped to 108,500 KRW.

Analysts attribute the stock price decline to the overall weakness in the IT sector and consecutive net selling by foreigners and institutions. Over the past three trading days, foreigners have net sold 6.1734 trillion KRW in the KOSPI market, marking a record-breaking selling streak, during which Kakao ranked fifth among the top net sold stocks by foreigners with 167.2 billion KRW. Since the stock split on the 15th of last month until the previous day, foreigners have net sold a total of 688.6 billion KRW worth of Kakao shares, only net buying on four trading days during this period. Institutional investors also net sold 556.4 billion KRW worth of shares during the same period.

Experts analyze that since solid earnings are expected and investments in the content sector are ongoing, there is sufficient upward momentum. The day before, Kakao Entertainment announced that it would acquire a 20.11% stake in the U.S. webtoon platform ‘Tapas’ and a 48.32% stake in the web novel platform ‘Radish’ for 93.4 billion KRW and 180.8 billion KRW respectively. It is anticipated that Kakao will eventually acquire full ownership of both companies at a cost of about 1 trillion KRW. This move could instantly boost Kakao’s relatively weaker position in the U.S. webtoon and web novel markets compared to NAVER and serve as a catalyst for Kakao’s content business to expand overseas in earnest.

In particular, since the U.S. market is still in its early stages, significant growth is expected going forward. Hyunyong Kim, a researcher at Hyundai Motor Securities, stated, "The current U.S. webtoon and web novel market is estimated to be about 250 billion KRW this year, with the digital conversion rate of the comic market only around 10%. Considering that Korea and Japan have already formed trillion-KRW scale markets solely through webtoons and the size of the U.S. economy, the growth potential is enormous."