Kakao Group Stocks Hit by Negative Factors, Facing Short Selling Pressure

[Asia Economy Reporter Ji Yeon-jin] The short-selling attacks on Kakao Group, which has recently faced a series of adverse events, are intensifying. Following the controversy over the ‘stock option’ cash-out by the management of KakaoBank and KakaoPay, which were listed last year, the news that Chairman Kim Beom-su of Kakao is under police investigation for tax evasion allegations has made the group a target of short selling.

According to the Korea Exchange on the 20th, KakaoBank recorded the highest short-selling transaction amount in the KOSPI market yesterday with short sales worth approximately 27 billion KRW. Kakao (23.4 billion KRW) ranked third in short-selling volume after LG Chem (26.5 billion KRW), and KakaoPay (10.4 billion KRW) ranked 18th. KakaoBank also recorded the highest short-selling volume in the KOSPI on the 18th.

This year, short selling was concentrated on LG Chem ahead of the listing of LG Energy Solution, which was spun off from LG Chem. Since the electric vehicle battery business that supported LG Chem’s stock price was transferred to LG Energy Solution, there are expectations that LG Chem’s growth will slow. However, the focus of short selling is shifting toward Kakao amid various adverse events.

Adverse news related to Kakao keeps emerging just as people start to forget. Following the controversy over the ‘cash-out’ by KakaoPay’s management, including CEO Ryu Young-jun, who exercised stock options after listing and gained profits worth about 90 billion KRW, it was reported yesterday that Yoon Ho-young, CEO of KakaoBank, also exercised some stock options after listing. Additionally, last year, the Center for Financial Transparency accused Chairman Kim and his personal company K Cube Holdings of evading taxes worth around 800 billion KRW during the merger process of Kakao and Daum, and the police have begun a full-scale investigation. Furthermore, in the case of KakaoBank, the large-scale release of institutional investors’ locked-up shares next month is also believed to have encouraged short selling.

Yesterday, KakaoBank’s stock price fell to 41,150 KRW, close to the public offering price of 39,000 KRW, hitting a 52-week low again, and Kakao also dropped below 90,000 KRW, recording its lowest price. KakaoPay continued its downward trend on the same day, falling to as low as 127,000 KRW.