November 22, 2024

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[THE INVESTOR] Kakao board Chairman Kim Beom-su is tightening his grip on the internet giant.

Currently, Kim is the company’s largest shareholder with an 18.63 percent stake. He also owns K Cube Holdings, a venture capital firm and the second-largest shareholder with 14.74 percent stake. 

Considering other favorable shares owned by his special interest groups such as family members and employees, he now controls almost 40 percent of the company.

And he is seeking to further enhance the power of the board of directors.

In March, Kakao shareholders agreed to reduce a clause that required their approval for the company to issue new shares worth more than 40 percent of traded shares or to make any change in the ownership through the shares.

The number of board directors also increased to 11 from the previous limit of eight.

The company made a similar attempt in 2014 when Kakao and Daum merged, but it faced resistance from shareholders, especially institutional and foreign investors. At the time, the company’s favorable shares stood at just 14 percent.

“There might be some criticism about limiting shareholders’ rights. But the enhanced power of the board is speeding the company’s overall decision-making, including fresh funding for business expansion,” said a Kakao official on condition of anonymity.


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“Speed is key to success in the ever-evolving IT industry. Even the nation’s most innovative companies such as Kakao and Naver have struggled to be prompt in their decision-making process as their businesses continue to expand.”

Kakao has been revamping its business portfolio aggressively in recent years, selling off less profitable businesses while investing in a slew of promising startups. Its number of affiliates now reaches 70, compared to 14 before the merger.

It has recently been pouring considerable resources into online-to-offline services such as KakaoTaxi and KakaoDriver.

But its relentless business expansion has yet to lead to exploding profits, with the company witnessing a more than 30 percent plunge in share price this year. 

In the second quarter, Kakao posted 376.5 billion won ($340 million) in revenue and 26.6 billion won in operating profit. However, excluding earnings of LOEN, the music streaming service it acquired in March, its operating profit was 8.6 billion won.

“Its archrival Naver saw its share price surge 27.5 percent this year, largely buoyed by its mobile-focused strategy. But Kakao shares plunged more than 30 percent due to its sluggish ad and mobile game sales,” said Oh Dong-hwan, an analyst at Samsung Securities.

Citing little synergy with the PC-based Daum and its still nascent online-to-offline services, the analyst lowered the target stock price to 80,000 won from the previous 100,000 won.

“Kakao is launching new online-to-offline services such as Kakao Hair Shop and Kakao Parking but there is no immediate sign for the profits to surge considering more investments should be injected for marketing activities,” he said. 


By Lee Ji-yoon (jylee@heraldcorp.com)