Kakao announced a business restructuring centered on a spin-off on the 21st. A spin-off allows existing shareholders to hold shares of both the split company and the newly established company, earning praise for being shareholder-friendly. Nevertheless, Kakao's stock price plummeted on that day. Interest also focuses on why Kakao chose a spin-off rather than another corporate division method known as a property-based division.
On that day, Kakao held a board meeting and resolved to split the company into KakaoAI (newly established company) and KakaoX (split company) through a spin-off. The split ratio, based on book value of net assets, is 0.36 for KakaoAI and 0.64 for KakaoX. Existing Kakao shareholders will receive shares of both companies according to the split ratio.
This means that investors holding Kakao stock can receive shares of the newly established KakaoAI in addition to the KakaoX shares they retain from the original Kakao, proportional to the split ratio and ownership percentage. The key difference between this approach and property-based division, another corporate division method, is that existing Kakao shareholders will directly hold stakes in both companies.
Therefore, spin-offs are often viewed as positive news in capital markets. However, following Kakao's announcement of a spin-off, its stock price continued to fall sharply during trading. At 10:52 a.m., the stock traded at 36,000 won, down 13.18% from the previous trading day. Later, the decline narrowed, and the stock closed at 35,800 won, down 7.49% from the prior session.
This was the first time since March 4, when the stock fell as much as 16.28% during trading immediately after the outbreak of war between the U.S. and Iran, that Kakao recorded a double-digit decline during the day. In the past, Kakao faced market skepticism over its governance due to repeated indiscriminate business unit divisions, expansion of affiliates, and attempts to list them. As a result, most of its listed affiliates have seen their stock prices fall below their initial public offering prices.
Securities industry experts analyze that one reason Kakao chose a spin-off rather than a property-based division while pursuing corporate division to strengthen competitiveness on that day lies in these concerns.
Unlike a spin-off, in a property-based division, the split company holds 100% of the equity in the newly established company. This method divides only the company's assets without splitting shareholders' stakes. Since the new company becomes a wholly-owned subsidiary of the parent company, some argue that existing shareholders receive almost no benefits. Moreover, because competitive segments within the split company are separated out, it is sometimes viewed as damaging shareholder value.
In the past, cases occurred where major domestic conglomerates restructured or split their corporate governance to suit the preferences of controlling shareholders using this method, leading to frequent negative perceptions.
Especially, when a property-based subsidiary was separately listed on the stock market, dual listing emerged as a social issue. Once a subsidiary is listed, investors wishing to invest in that business must purchase the subsidiary's shares separately. This can lead to situations where the parent company's investment appeal diminishes, leaving existing shareholders with no choice but to feel displeased.
Kakao's decision to opt for a spin-off, which is considered shareholder-friendly, is interpreted as an attempt to address ongoing burdens related to repeated listings and to rebuild trust among market participants.
A securities industry official stated, "Kakao's plan to allocate 20% to 35% of its adjusted free cash flow (FCF) from next year through 2029 for shareholder returns is likely linked to restoring market confidence." The official added, "Although the stock price fell sharply today, it remains to be seen what long-term impact this will have."
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