The merger is the first step in the spin-off that would divide Kakao into Kakao AI and Kakao X. Kakao previously disclosed a split ratio of 36.5% for Kakao AI and 63.5% for Kakao X based on book value of net assets. While Kakao X is larger on a book net asset basis, the operating substance — messaging, artificial intelligence and advertising — is concentrated in the newly created Kakao AI. That is why concerns have emerged that the split ratio fails to reflect actual value. If the merger of the investment arm, the core of Kakao X, also fails, the split ratio would have to be redrawn and the blueprint the company presented would return to square one.
Sentiment among the shareholders holding the key is clearly negative. Opposition is particularly strong among employees worried about job security amid the reorganization. Posts pledging opposition to the merger by employees holding company shares have appeared in succession on an internal anonymous community, and shareholder group chat rooms are filled with posts verifying objections. The Kakao union earlier formalized its opposition to the spin-off, saying management's explanations were insufficient, and has encouraged union members and minority shareholders to take part.
If minority shareholders rally around opposition in this way, the possibility that the spin-off collapses before it even begins cannot be ruled out. The shareholder structure leaves ample room for objections to accumulate. As of the second quarter of this year, friendly stakes including that of founder Kim Beom-su stood at 23.99%, while the National Pension Service held 5.4% and Tencent affiliate MAXIMO 5.21%. The remaining 64.83% belongs to minority shareholders. The 20% threshold is slightly less than a third of the minority shareholder stake. The union also plans to ask the National Pension Service to vote against the deal.
Kakao, for its part, maintains that the spin-off will have a positive effect on the revaluation of corporate value and on business efficiency. The company says brokerages value the sum of its businesses at about 34 trillion won, while its recent market capitalization has hovered around 16 trillion won, less than half that figure, pointing to a wide valuation gap. The aim is to resolve the undervaluation of affiliates through independent management by business and to focus on new ventures, winning recognition of "fair value" from the market.
Management plans to hold a briefing on Sept. 16 to allay the concerns of small investors. The session is expected to address what the company calls the misconception that the spin-off damages shareholder value and to highlight factors that will benefit growth over the medium to long term. Even if the small-scale merger passes, minority shareholder support is essential for the spin-off to win final approval at an extraordinary shareholder meeting in December, making continued persuasion necessary.
A Kakao official said, "We will address the questions shareholders are curious about, including the growth strategy after the spin-off and future shareholder return policies," adding, "We will continue active communication so that dissatisfaction can be reduced."
