Kakao (035720.KS) is pursuing the largest governance overhaul since its founding through a spin-off, driven by a strategy to lift both the growth potential and corporate value of its artificial intelligence business. The company concluded that bundling its AI platform — which needs fast investment and execution — together with its financial, content and mobility businesses, which differ in character and growth stage, under a single decision-making and capital-allocation structure has kept each unit's growth from being properly reflected in its corporate value. After restructuring non-core businesses over recent years, Kakao plans to reorganize its governance through this split and win a fair valuation by growing in the full-fledged AI era.
Kim Do-young, CEO of Kakao Investment and head of the group investment strategy office at the CA council, explained at a press briefing on the spin-off held on the 21st that from an investor's standpoint, investing in an AI specialist company and investing in mobility or entertainment carry different returns on capital and different expected returns. He said the company aims to separate business divisions with different risks so that investors can maximize the corporate value they assign, resolving a significant conglomerate discount.
Kakao presented its current corporate value as more than 50% undervalued relative to estimates by domestic and overseas brokerages, stressing the need for a revaluation through the spin-off.
As of August this year, the average consensus for the Kakao group's potential value under the sum-of-the-parts (SOTP) valuation method by domestic and overseas brokerage research centers stood at 34.2 trillion won ($23.9 billion). That is about 17.4 trillion won, or more than 50%, below the three-month average market capitalization of 16.8 trillion won. The price-to-earnings ratio (PER) has also fallen from 80 times at its 2021 peak to 21.9 times based on 2026 estimates. Kakao considers that a low multiple for an information technology services company that holds a dominant market share in each of its service segments. The value of subsidiaries such as KakaoBank, Kakao Pay, Kakao Entertainment, SM Entertainment and Kakao Mobility, as well as the growth potential of the KakaoTalk platform, is not sufficiently reflected in the current corporate value, the company says. Kakao believes that once each company's performance is recognized independently after the split, the value of each business will also be assessed more clearly.
Kakao AI will inherit the existing core business and lift its growth potential through concentrated investment in AI. It has set a goal of securing more than 20 million daily active users (DAU) for AI by 2030 and increasing platform usage time by more than 50%. The company also unveiled a plan to achieve annual average revenue growth of about 20% through 2030 via AI advertising, agentic commerce and expanded subscriptions, raising revenue to more than 6 trillion won. It aims to raise the share of AI revenue to double digits of total revenue by 2028 and to top 1 trillion won by 2030.
Kakao CEO Chung Shin-a stressed that with this spin-off, Kakao AI will gain a business structure that lets it focus solely on core operations by separating out the substantial role of managing subsidiaries. She said the company will allocate all resources to creating new growth opportunities centered on AI, beyond existing advertising and commerce.
Kakao X will focus on its investment function while operating core business groups, including fintech such as KakaoBank, Kakao Pay and Kakao Pay Securities; content such as Kakao Entertainment, SM Entertainment and Kakao Piccoma; and Kakao Mobility. The appointment of Kim Do-young, CEO of Kakao Investment, as head of Kakao X is seen as a personnel decision that clarifies the company's character as an investment firm.
Investment funds of 6.4 trillion won ($4.5 billion) available to Kakao X are expected to serve as the key ammunition for finding new growth engines. The plan is to restart Kakao's growth formula of finding new markets and raising them into independent growth pillars, as it did with KakaoBank, Kakao Pay and Kakao Mobility. Virtual assets, physical AI and global fandom are among the main areas under review. Kim said that while investment so far had been concentrated on the domestic and Asian markets, going forward investment in innovative companies in global markets, including the U.S., would gather pace. He said this would lift both corporate value and shareholder value.
How quickly the two companies deliver visible results is expected to be the key to a future revaluation. On the main bourse that day, Kakao closed at 35,800 won, down 7.49% from the previous session, reflecting the market's caution over the spin-off.
An industry official said the key will be how fast Kakao X, without KakaoTalk, shows business growth and how it is valued accordingly, and how firmly it can identify future growth pillars using the 6.4 trillion won in funds.
