Kakao Pay pushes back IPO to November despite tight schedule

Kakao Group’s payment services unit Kakao Pay Corp. has pushed back its IPO to November due to growing concerns regarding the impact of regulation on its core business model. The company had first delayed the schedule in July after the financial regulator has questioned its valuation calculation method.

According to the industry, Kakao Pay has submitted the revised version of its stock registration form on Sept. 24 to the financial authorities. The service provider plans to resume the IPO process from mid-October after the revised form takes effect from Oct. 18.

The company will conduct demand forecasts among institutional investors in late October and open subscriptions for retail investors in early November.

Market watchers highlight that the decision shows the level of gravity posed by the recent political moves, as it comes amid a tight schedule that Kakao Pay is facing. The company must complete its IPO filing by Dec. 27 this year, or within six months from its approval of preliminary filing to the Korea Exchange.

Kakao Pay’s revised stock registration form offers a more comprehensive analysis of the regulatory environment. Specifically, the company has added detailed explanations on the challenges posed by the new financial consumer protection law and the business changes it had to make accordingly. Kakao Pay has halted financial product comparison services in the areas of auto insurance as well as pet and smartphone insurances.

The securities industry expects that such regulation will have a tremendous financial impact on Kakao Pay. Financial services segment including investment, loans and insurance took up 22.66% of the company’s revenues last year, growing sharply from 2.37% in 2019. But the recent legal prohibition questions sustainability of the revenues generated in the segment.

Kakao Pay’s counter-argument on revenue concerns centers around the role that its digital insurance affiliate will play in the market. Kakao Pay plans to launch the insurance unit within the second half of this year, powered by a mobile trading system (MTS) that can raise commissions from users.  

The revised registration form did not make any changes to its IPO price band of 60,000-90,000 won ($50.98-76.48). The company’s market cap will be 11.7 trillion won if the highest price of 90,000 won is taken.

“Our total valuation will remain intact and we will post sustained growth,” said a Kakao Pay official.

The financial industry, however, is making mixed projections on whether Kakao Pay will have a successful IPO. Not only its second-largest shareholder, Alipay of China, was hit by the Chinese government’s big tech crackdown last year, but the regulatory landscape in South Korea is also becoming unfavorable.

“Both Kakao Corp. and KakaoBank Corp.’s shares are dropping. China Evergrande crisis is also driving volatility in the global financial markets. Such circumstances may pose extra risks to Kakao Pay’s IPO plans,” said a financial industry official.

Write to Ye-jin Jun at ace@hankyung.com
Daniel Cho edited this article.