Tencent, Korea Value poised to see sixfold return from KakaoBank

Chinese technology giant Tencent Holdings, Korea Value Asset Management Co. and South Korea's top lender Kookmin Bank are among a group of shareholders expected to pocket sixfold returns from South Korea's KakaoBank, which is set to go public next Friday.

The initial public offering of KakaoBank was priced at the top of its guidance range at 39,000 won ($34) after it drew 2,500 trillion won ($2.2 trillion) worth of bids from institutional investors last week. That marked the largest-ever amount of institutional bids for a domestic listing.

Between July 26 and 27, retail investors placed bids for 58.3 trillion won ($50 billion) of KakaoBank shares in the fifth-largest amount of retail bids for a South Korean IPO. The retail portion was 181 times oversubscribed.

The 2.55 trillion won ($2 billion) offering, which became the country's third-largest IPO, is poised to generate a sixfold return to its existing shareholders, which also include Korea Post, eBay Korea and game developer Netmarble Corp.

Its top shareholder is its parent Kakao Corp., the country's dominant mobile messenger app operator, with a 31.62% stake.

Korea Value Asset, the banking platform's No. 2 shareholder with a 26.97% stake, is likely to pocket 3.7 trillion won in net proceeds, assuming it cashes out of the holding at the offering price. It had poured a combined 632.5 billion won into the country's largest internet-only bank since it bought KakaoBank shares from its parent company Korea Investment Holdings in 2019 and new shares issued last year.
 
Korea Investment Holdings, with a 4.65% stake in KakaoBank, is tipped to report 648 billion won in net proceeds.

Two private equity firms --- TPG Capital and Anchor Equity Partners -- are likely to post a 66% return in less than one year from each of their 250 billion won investments in the banking app. Based on the IPO price, their stake is now worth 415 billion won.

Both TPG Capital and Anchor Equity Partners acquired a 2.6% stake in KakaoBank at 23,500 won apiece, participating in KakaoBank's 750 billion won rights issues in late 2020. At the time, the banking platform was valued at 9.3 trillion won, or half of its IPO valuation.

Shareholder name	Shareholding
Kakao Corp.	31.62%
Korea Value Asset Management	26.97%
Kookmin Bank of KB Financial Group	9.3%
Korea Investment Holdings	4.65%
Netmarble	3.72%
Seoul Guarantee Insurance	3.72%
Korea Post	3.72%
eBay Korea	3.72%
Tencent Holdings	3.72%
Yes24 (online bookstore)	1.39%
TPG Capital	2.6%
Anchor Equity Partners	2.6%

With a market capitalization of 18.5 trillion won, the four-year-old banking platform is set to become the country's third-largest listed financial services firm, just behind KB Financial Group and Shinhan Financial Group.

But it is unlikely to repeat the first-day rallies of recent high-profile IPOs. Five trillion won worth of its shares, or 27% of its shares in circulation, could be dumped on the first trading day of Aug. 6, given that the proportion of shares subject to lockup is only 13.4% of shares held by foreign institutional investors.

Addressing the ongoing debate about the internet bank's valuation, BNK Investment & Securities on Monday suggested 24,000 won as its target price, or 38% below its IPO price, questioning the platform-based bank’s growth potential.

During the July 27-27 subscription period, retail investors placed bids for an average of 30.8 million won, according to the underwriters. An individual investor will be allotted one share for every 7 million won in deposits for the subscription.

Write to A-young Yoon, Jin-seong Kim and Ye-jin Jun at youngmoney@hankyung.com
Yeonhee Kim edited this article.