"Did I Fail at Pickup?" Kakao Drops Again... Ant Investors in Tears

Kakao Announces Win-Win Plan but Market Remains Cold
Four Consecutive Days of Decline... Kakao -0.82%
KakaoBank -2.75% KakaoGames -1.52%
Retail Investors Tried to Buy the Dip, but Stock Prices Fall Again, Sigh

Kakao Friends characters. Photo by Kakao

[Asia Economy Reporter Han Seung-gon] "It wasn’t underground," "This is the scene of a failed 'jupjup'," "Ah, this is really frustrating."

The stock price of Kakao, which had been falling day after day due to the government and political circles' platform regulation stance, rebounded with the announcement of a 'win-win plan,' raising expectations, but then returned to a downward trend. In the process, so-called retail investors (a securities industry slang referring to individual investors) who tried to buy at the bottom are left bewildered. They thought the price had already fallen enough and engaged in what is called 'jupjup' (a term expressing the act of buying stocks that have dropped), but the stock price is falling again.

On the 16th, in the KOSPI market, Kakao closed at 121,500 KRW, down 0.82% from the previous day. Kakao Bank (-2.75%) and Kakao Games (-1.52%), affiliates, also showed sluggish performance amid four consecutive days of decline. Previously, Kakao’s stock price fell 21.1% over seven trading days starting from the 8th. Its market capitalization shrank to 54 trillion KRW. The ranking, which was 3rd in KOSPI market capitalization, dropped to 5th.

In this situation, individuals have been net buyers of Kakao for seven consecutive trading days. However, retail investors are confused by the falling stock price. Mr. Kim, a company employee in his 30s, said, "How can the stock price keep falling consecutively like this?" and added, "I thought I entered at the bottom, but since the price is falling so much, it feels like I entered at the peak," expressing frustration.

Another company employee in his 40s, Mr. Park, said, "They announced a win-win plan, but it was just a 'flash rebound,'" and added, "I think Kakao needs to respond properly." He continued, "Both shareholders and retail investors are just sighing in this situation."

The sharp drop in Kakao’s stock price began on the 7th when the Democratic Party of Korea publicized regulatory measures against unfair trade on online platforms. Financial authorities also started regulatory actions on platforms operated by these companies. Meanwhile, Kakao’s stock price fell below 110,000 KRW intraday for the first time since May 27 (intraday low of 119,500 KRW).

Kakao has been showing a continuous decline due to controversies over big tech regulations by financial authorities. Photo by Kakao

With the stock price either falling, slightly rebounding, or fluctuating daily, Kakao moved to manage the situation. On the 14th, it announced a win-win plan including △ withdrawal from neighborhood business and abolition/reduction of platform fees △ establishment of a 300 billion KRW win-win fund.

However, the market’s response was cold. The government is also continuously reviewing regulatory measures. Han Sang-hyuk, Chairman of the Korea Communications Commission, stated that appropriate regulatory measures for online platforms such as Kakao would be sought.

Chairman Han said on the 15th at a press center in Jung-gu, Seoul, after a meeting with representatives of the three telecom companies SK Telecom, KT, and LG Uplus, regarding the collection of broadcasting and communication development funds from Kakao and Naver, "I think it is right to contribute to society if there is profit," adding, "However, the method?whether it is paying into a fund, taxes, or other forms?can vary."

Regarding platform regulation, he emphasized the need to cooperate with the Fair Trade Commission. Chairman Han said, "I think there are many areas where we need to cooperate with the Fair Trade Commission in the platform industry," and added, "There are parts where strong investigations like the Fair Trade Commission’s are necessary, but isn’t the majority of the area not like that? We need to find regulatory methods that are flexible and appropriate."

Meanwhile, retail investors hope that the 'regulatory risk' will be resolved following the announcement of the win-win plan. On securities online communities, posts like "Will Kakao finally recover? When will it wake up?" are appearing, showing expectations. Mr. Cha, a company employee in his 30s, sighed, saying, "Maybe the stock price will rise a bit after the holidays."

Meanwhile, securities firms have lowered Kakao’s target price. On the 16th, Samsung Securities and Hanwha Investment & Securities both lowered Kakao’s target price. Samsung Securities cut it by 10% from 200,000 KRW to 180,000 KRW, and Hanwha Investment & Securities lowered it by 8.11% from 185,000 KRW to 170,000 KRW.