Kakao shares bleed after top execs sold

Industry

Published: 11 Jan. 2022, 18:36 Updated: 12 Jan. 2022, 09:14

Kakao shares bleed after top execs sold

Ryu Young-joon, 44, who was appointed as Kakao’s new co-CEO, voluntarily resigned from his post on Monday. [KAKAO]

Kakao Pay executives' dumping of the company's stock continued to depress shares in that company and other Kakao affiliates.

Investors dumped shares in Kakao and its subsidiaries Tuesday despite the resignation of a CEO-designate on Monday.

Kakao’s stock price hit an all-time low to close at 95,000 won ($79.5) on Tuesday, down 1.7 percent compared to the previous day.

On Monday, Kakao posted a regulatory filing saying that 44-year-old Ryu Young-joon “voluntarily resigned” as designated co-CEO of the company after its union raised questions about his dumping of Kakao Pay stock.

It said he had "no sense of morals as the head of the company."

Ryu was named co-CEO of Kakao in November, which was to be effective in March pending shareholder approval. He remains CEO of Kakao Pay, though he is scheduled to be replaced in March.

Ryu sold 230,000 Kakao Pay shares in a block deal on Dec. 10, only a month after the company's listing. The shares he sold were worth 46.9 billion won, according to a Financial Supervisory Service (FSS) filing.

Ryu and seven other Kakao Pay executives sold 90 billion won worth of shares on that day. One executive was Shin Won-keun, chief strategy officer, who is supposed to replace Ryu in March.

After listing, many companies insist that employees exercising stock options hold onto the shares for a year. Kakao Pay did not require this of its executives, although it did for more junior staff.

Ryu made a formal apology to employees on Jan. 4, but Kakao's union issued a statement the next day urging the company to withdraw its plan to appoint Ryu as co-CEO.

“The group dumping of shares by key managers of a company is unprecedented in the history of Korea’s stock market,” the union said, adding that “such a move will cause enormous damage to the stock price of the company.”

Angry shareholders posted comments online such as, "What's the point in buying a stock that the owner sells?" and, "This is playing with the essence of a capital market."

Ryu’s selling of his shares is not a matter of legality but morality, according to Park Kyung-suh, a professor at the Korea University Business School.

“It’s like the captain jumping off of a sinking ship before anyone else,” he said.

“There may be many reasons why executives sold shares, but it sends a message to investors that the company’s executives expect stock prices to fall. And all the while, they’re trying to maximize their profit with inside information they have access to.”

Kakao closed with a market cap of 42.4 trillion won on Tuesday. That’s 43.7 percent lower than its peak of 75.2 trillion won last June 23, with shares hitting 169,500 won, which made it the Kospi’s No. 3 company by capitalization. On Tuesday, it was No. 9.

The company's market cap shrunk by 1.5 trillion won in a single day, Monday, compared to the previous trading session. On Tuesday, it fell by 700 billion won.

Kakao’s subsidiaries also continued downward spirals on Tuesday.

Kakao Bank closed at 49,350 won, down 3.4 percent from the previous day, while Kakao Games fell 2 percent to close at 72,700 won. Kakao Pay slightly recovered by 0.7 percent to close at 149,500 won.

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]