Kakao (035720.KS) has halted a plan by its affiliate Kakao Mobility to list in the U.S. market, concluding that the deal would be unlikely to benefit minority shareholders.
Kakao's board recently resolved to oppose Kakao Mobility's plan to list American depositary receipts (ADRs) in the U.S., according to information technology industry sources on the 23rd. The board said the plan was focused on allowing one shareholder to cash out, making it hard to extend the gains to minority shareholders, and that it raised conflict-of-interest concerns.
Kakao Mobility had been pursuing the ADR listing for some time. Unlike a conventional initial public offering, the plan would have used only the stake held by TPG, the private equity firm that is the second-largest shareholder, as the underlying asset. TPG put the option forward while reviewing ways to exit its investment through a shareholder value committee in which it holds a majority of the seats.
Kakao said it voted against the plan because the structure centered on monetizing TPG's shares, making it difficult to view the proceeds as returning economic benefits to Kakao Mobility's minority shareholders. The company also cited conflict-of-interest concerns between shareholders of the two companies, noting that a duplicate listing alongside parent Kakao could split investment demand and widen the discount to Kakao's net asset value (NAV).
"We took into account, among other factors, that separate shareholder protection measures alone have limits in resolving the imbalance in economic benefits, given that no funds would flow in directly from the listing," Kakao said.
The decision effectively puts Kakao Mobility's U.S. ADR listing on hold. Kakao said, however, that it "is not denying the need for Kakao Mobility's financial investor to exit its investment," adding that it "could revisit the matter if the listing structure or the economic benefits accruing to the company and its minority shareholders change."
Kakao plans to disclose further details either when specifics are finalized or within six months.
