Kakao stock price hits an all-time high at 410,500 won
Shares of Kakao hit an all-time high on Thursday as investors turned bullish due to the rising profitability of its major services, robust demand for digital content during the coronavirus pandemic and the highly anticipated listing of its affiliate Kakao Games.
The stock closed at 410,500 won ($347), up 4.72 percent from its previous close, to surpass the 400,000-won level for the first time since it was listed on the main bourse back in 2017.
Analysts attributed the optimistic investor sentiment to growing profit, especially as some services largely offered for free have started gaining momentum to generate profit.
“Its finance services are now pushing beyond just processing payments or transfers as it brokerages financial products such as insurance,” said Jung Ho-yoon, an analyst at Korea Investment & Securities.
The analyst also cited Kakao’s expanded mobility service offering different types of taxis and a new advertising model as factors driving revenue growth.
The record-high price on Thursday represents a 169 percent increase from the beginning of this year as the stock price shot up after the spread of the coronavirus in March.
The pandemic and the resulting social distancing guidelines saw an increase in the number of people shopping and sending gifts online and consuming digital content, two areas where Kakao has a strong presence.
A tremendous investor appetite for the upcoming initial public offering (IPO) of Kakao Games, a gaming publisher 54 percent owned by Kakao, helped bolster the bullish sentiment. The listing is scheduled for Sept. 11.
Multiple media outlets reported that the gaming company enjoyed higher than expected demand from institutional investors in the book-building process designed to predict subscriptions on Aug. 26 through 27.
Kakao Games will float 16 million shares to the tech- and bio-heavy Kosdaq market, adding that it would price its IPO at 20,000 won to 24,000 won a share, according to a statement released Wednesday.
But the final issue price is subject to change, depending on the bids by the investors in the process.
The head of Kakao Games said that the proceeds, expected to be around 380 billion won, will go toward acquiring gaming developing companies and expanding its foothold overseas.
“Local game outlets show stable performance even in the pandemic era when foreign game makers suspend their projects,” said Kakao Games CEO Namkoong Whon on Wednesday.
“This is a big opportunity, and we will continue to be on the lookout for acquisition and investment of local gaming companies,” he said.
Kakao Games was born out of a merger between Daum Games and the game publishing platform Nzin in 2016. It currently offers PC games and mobile games, including arcade games using Kakao Friends characters.
Analysts offer mixed views of the upcoming public debut of Kakao Games, which will become the first Kakao affiliate to go public.
“[Kakao Games] is expected to rely on mergers and acquisitions or strategic partnerships to overcome its shortcomings of having few game line-ups developed by the company,” said Choi Jong-kyung, an analyst at Heungkuk Securities. “The strategy will likely allow for long-term growth."
Kakao Games took over a controlling stake in XLGames, a game developing unit, in February.
Still, Kim Jin-gu, an analyst at KTB Investment & Securities, said that the weakness in game development and murky prospects surrounding renewing contract of Black Desert in Europe and North America stood in the way, valuing the company at 2.1 trillion won.
Samsung Securities and Korea Investment & Securities are underwriting the IPO.
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