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Kakao prepares move to Kospi

July 06,2017
Kakao is growing up on the stock market.

The tech company, which operates the country’s most popular messaging app, KakaoTalk, and search engine Daum announced Tuesday that it plans to leave Korea’s junior stock exchange, the Kosdaq, and list on the main index, the Kospi, by next week, a move that analysts believe will draw high-net-worth investors.

“We gained preliminary approval on Monday and applied for delisting from Kosdaq earlier this week,” a Kakao spokesperson said Wednesday. “If things go as planned, Kakao will debut on the Kospi next Monday.”

In the meantime, the stock will continue trading on the Kosdaq until Friday, he said.

However, the Korea Exchange, the country’s stock market operator, has yet to deliver final approval for the move.

The big question is whether Kakao, currently the second-largest company on the Kosdaq, has the capital to be included in the Kospi 200 index that tracks the country’s 200 largest companies. The inclusion is important because stocks on the Kospi 200 can be listed on futures and options markets and gain access to a wider range of transactions.

Market analysts are optimistic, given Kakao’s market capitalization.

“A stock can be included in the Kospi 200 when its average market cap is among the top 50 of all Kopsi-listed companies for the first 15 days after listing,” said Kang Song-cheol, a researcher at Korea Investment & Securities. “Kakao’s current market cap is nearly 7 trillion won [$6.1 billion] and that of a stock in the Kospi’s top 50 stands at around 6 trillion won. So that increases the chances of Kakao finding its way into the Kospi 200.”

Kang projects the decision will be made as early as September.

The market is cheering the move. Ever since the company first announced plans to move to the main bourse in May during its first-quarter earnings call, its share prices have been on the rise. Kakao closed at 102,500 won on Wednesday, up 4.27 percent from the previous trading day.

During the call, Choi Sae-hoon, Kakao’s chief financial officer, refrained from specifying why the company was making the move, only saying, “The shareholders proposed the transfer as Kakao merges with LOEN Entertainment,” a music record label.

The board of directors went on to approve the proposal in June.

Kakao’s exit from the Kosdaq will make the secondary index heavily dependent on biopharmaceutical stocks, a sector that often sees high fluctuation. After Kakao leaves, the portion of biopharmaceutical companies on the bourse will increase to 50 percent from the current 45 percent.

The largest stock on the Kosdaq is a pharmaceutical company, Celltrion. Its marketing affiliate, Celltrion Healthcare, is planning to make an initial public offering on the Kosdaq this year.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]