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IPOs

Kakao Pay sets IPO price at top end on heated demand

Attracts 1,545 institutional investors with $1.1 trillion worth of orders

By Oct 22, 2021 (Gmt+09:00)

South Korean consumers are making payments through Kakao Pay at a fashion festival in Seoul
South Korean consumers are making payments through Kakao Pay at a fashion festival in Seoul

Kakao Group’s payment services unit Kakao Pay Corp. set the initial public offering price at the top end of the proposed band thanks to strong demand from institutional investors, according to South Korea’s investment banking industry sources.

Its bookbuilding on Oct. 20-21 attracted 1,545 institutional investors at home and abroad that ordered about 1,400 trillion won ($1.1 trillion) worth of its shares, the ninth-largest demand for South Korea’s IPOs, according to the sources on Oct. 22. The bookbuilding was known to have been 1,714 times oversubscribed.

Most of the participants placed bids at prices higher than the top end of its indicative price range of 60,000 won and 90,000 won apiece, while 70.4% of the institutional investors have committed to the lockup clause, promising not to sell Kakao Pay shares for a certain period following the IPO.

Kakao Pay priced its offering at 90,000 won per share, reflecting such strong demand, to raise 1.5 trillion won. Its market capitalization is to reach 11.7 trillion won, becoming one of the top 30 companies in the Kospi in terms of market capitalization.

PROMISING FINTECH PLATFORM

Investors saw the strong growth potential of Kakao Pay, a promising fintech platform, even as the company postponed the IPO twice and cut the IPO price by 6%, analysts said.

Kakao Pay is rapidly expanding the number of customers and the size of transactions based on KakaoTalk, a mobile platform giant. As of the end of last year, the cumulative number of subscribers was 35 million, while the value of transactions including payments, financial products and money transfers totaled 67 trillion won. The company expects the transaction value to rise to near 100 trillion won this year.

Kakao Pay hopes to achieve its first profit this year since its launch with an operating profit of 2.6 billion won in the first half. Its revenue during the period stood at 216.3 billion won, 76% of 284.4 billion won for the whole of 2020. Its profit is expected to gradually grow since its new businesses such as loan advertising started bearing fruit. The company is also preparing to set up a digital non-life insurance company.
Kakao Pay sets IPO price at top end on heated demand

COMPETITION RATIO OF RETAIL INVESTOR SUBSCRIPTION TO BE WEAK

Kakao Pay is scheduled to sell 4.25 million shares to retail investors on Oct. 25-26. Individual investors can subscribe the IPO through Samsung Securities, Daishin Securities, Shinhan Investment Corp. and Korea Investment & Securities Co.

Kakao Pay decided to adopt the equal share allocation system for all stocks to be sold to retail investors. Individual investors that subscribe a minimum of 20 shares with a deposit of 900,000 won will receive the same number of the stocks.

That is widely expected to sharply reduce the competition ratio of the subscription, the IB industry sources said.

“Many will subscribe only on a minimum basis because they receive the same number of shares regardless of the size of deposits,” said one of the sources. “The competition ratio will be low even if the number of subscribers is large.”

Write to Jin-Seong Kim at jskim1028@hankyung.com

Jongwoo Cheon edited this article.

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