Ants Investing in Kakao Despite Eat-and-Run Controversy

"Stock Price Decline... Lowest Price Buying Opportunity"
This Week Kakao Purchase of 238.4 Billion KRW

[Asia Economy Reporter Song Hwajeong] Amid the ongoing decline of Kakao Group stocks, which have been embroiled in a 'meok-twi (eat-and-run) controversy' due to the management's stock sales, individual investors are instead taking the opportunity to buy at lower prices.

According to the Korea Exchange on the 14th, individual investors have been net buyers of Kakao shares worth 238.4 billion KRW this week, making it the most purchased stock. Following that, they acquired KakaoBank shares worth 220.8 billion KRW. KakaoPay was also net purchased with 18 billion KRW.

It was expected that individual investors would turn their backs on Kakao as small shareholders suffered losses from the management's stock sales, but the opposite behavior has been observed. It is interpreted that individuals see the recent price drop due to the controversy as a buying opportunity at a low price.

Kakao has fallen more than 14% this year, dropping below the 100,000 KRW mark. KakaoBank has declined over 17%, breaking below the 50,000 KRW level, marking its lowest since its listing in August last year. KakaoPay has also dropped more than 15%. Kim Donghee, a researcher at Meritz Securities, said, "There is a high possibility that last year's fourth-quarter performance was the bottom, and after the March presidential election, the uncertainty over big tech regulations will be resolved, allowing investment sentiment to recover in earnest," adding, "A bottom-fishing opportunity to invest in Korea's representative big tech stocks is coming."

To mitigate the controversy, Kakao has introduced measures such as prohibiting the CEO from selling shares for two years and executives for one year after the listing of affiliates, but whether this can offset the stock price decline remains to be seen. This is because underwhelming fourth-quarter results last year and growth stock sluggishness due to early tightening concerns from the U.S. are still expected to weigh on the stock price. Hwang Hyunjun, a researcher at DB Financial Investment, analyzed, "Kakao's fourth-quarter revenue last year increased by 38% year-on-year to 1.71 trillion KRW, but operating profit decreased by 9% to 136.3 billion KRW, which is expected to fall short of market expectations (183.5 billion KRW). With significant increases in labor costs due to Kakao Ventures incentive payments and rising stock compensation expenses, and marketing expenses remaining high as in the previous quarter, profitability is expected to deteriorate."