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Foreign investors back Kakao

Korean IT giant secures $1 billion through GDR sale
Jan 19,2018

Kakao has successfully secured $1 billion in foreign investment, according to the IT giant on Thursday.

The funds were raised through selling global depositary receipts (GDR) to foreign institutional investors overseas. GDRs are bank certificates offered to investors from different countries that subscribe to hold a stake in one company - in this case, Kakao.

Last month the company announced that it would issue GDRs to institutional investors overseas. Over the following month it held 55 investor road shows worldwide to meet with potential investors and check the demand for the company’s shares.

Kakao had originally planned to hold 36 sessions, but held more upon investors’ requests. It successfully received subscriptions for the target amount of $1 billion.

The company said in a press release that a total of 8.2 million shares worth 129,004 won ($120.57) per stock will be listed on the Singapore Exchange in early February, after which the institutional investors can acquire shares.

The $1 billion investment is the largest a Korean company has raised through a foreign stock exchange in the past 10 years.

The price per share was based on Kakao’s closing price on Wednesday with a 3.7 percent discount. GDRs generally come with a discount of up to around 10 percent of the traded stock price as it is a large-scale purchase by institutional investors.

Kakao selling all of its issued shares despite a relatively low discount rate shows how eager foreign investors were to pump money into the Korean company.

Kakao plans to use the secured capital to acquire global start-ups in the content business including games, comics, music and video. It is also on the search for tech companies that have expertise in advanced fields like artificial intelligence technology.

“Foreign institutional investors recognized the growth potential in Kakao’s content-based global expansion plan, best exemplified by Piccoma’s rapid success in Japan,” said Sean Park, Kakao’s chief strategy officer. Piccoma is an online content platform offered by Kakao Japan that contains webtoons and novels.

“Kakao will focus on M&As that can deliver maximum synergy with Kakao’s existing business while offering strong potential for growth and profitability in order to maximize investor return.”

However, the company’s spokesman added that there are currently no concrete purchase plans.

“The raised investment is sort of an emergency fund to help us grab a good M&A opportunity when it’s there,” he said.


BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]