Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Kakao spin-off plan faces lingering investor distrust
Kakao office in Seongnam, Gyeonggi Province, June 9. Yonhap
By Nam Hyun-woo
Tangible results from AI business required for value improvement
Kakao’s ambitious plan to split its business into two entities handling its mobile messenger and investment businesses, respectively, is facing lingering investor distrust, with its stock price falling more than 7 percent to wipe out 1.8 trillion won ($1.3 billion) of market cap following the announcement on Friday.
The mobile platform giant stressed that the restructuring will take the form of a spin-off, in which shares of the newly created company will be distributed to existing shareholders in proportion to their current stakes, so the measure is aimed at safeguarding shareholder value.
However, investors remain skeptical over whether spreading Kakao’s businesses across multiple companies would help enhance corporate value, particularly when its existing artificial intelligence (AI) businesses have yet to generate earnings meeting market expectations.
During a board meeting Friday, the company approved the spin-off plan to split Kakao into KakaoAI and KakaoX. Kakao plans to complete the spinoff by Jan. 1 next year, and relist KakaoAI on Jan. 27.
KakaoAI will be a newly created entity, overseeing its flagship messenger KakaoTalk, advertising, commerce and AI business. Kakao CEO Chung Shin-a will lead the company.
The existing Kakao will be rebranded as KakaoX. KakaoX will focus on investment, and the company’s existing payment service, mobility platform and entertainment affiliates will remain under KakaoX.
While announcing the plan, the company said brokerage consensus values Kakao Group at 34.2 trillion won, about 17.4 trillion won higher than Kakao’s average market capitalization of 16.8 trillion won over the past three months. The company said the restructuring is intended to help the market reassess its value more appropriately.
“The main purpose of the spin-off is to address the significant discount on Kakao Group,” said Kim Do-young, who is now Kakao Investment CEO and named as KakaoX CEO.
The company also announced shareholder return policies for the two entities Friday, with KakaoAI planning to use up to 35 percent of its free cash flow to fund shareholder returns, while KakaoX will use 30 percent of dividends received from subsidiaries and 30 percent of gains from investments for shareholder returns.
KakaoX CEO appointee Kim Do-young / Courtesy of Kakao
Despite the promises, the continued sell-off appears to reflect investor doubts over whether splitting Kakao’s businesses across multiple companies would actually help enhance its corporate value.
For years, Kakao has faced pressure to reduce the number of its affiliates amid criticism from politicians that the group has expanded into businesses traditionally dominated by small merchants, as well as triggering controversy over its practice of spinning off businesses and listing them separately.
Particularly, it faced criticism after spinning off and listing some of its key businesses, including Kakao Games in 2020, KakaoBank in 2021 and Kakao Pay in 2021. As of the end of June 2021, Kakao had 158 affiliates, but following the criticism, the company worked to streamline its corporate structure, reducing the number to 99 by October 2025.
Against this backdrop, analysts said the spin-off plan has to deliver tangible results, particularly from AI, for Kakao to achieve the value improvement it is seeking.
“KakaoAI will incorporate its stable cash-generating businesses such as KakaoTalk, advertising and commerce with AI under a single company, and this simplifies the company’s structure as a platform and AI agent business,” Hanwha Investment & Securities analyst Kim So-hye said.
“However, Kakao’s AI business has yet to prove its monetization potential, making it difficult to give a premium simply because the company is classified as an AI company. Investors will need to see tangible indicators such as AI daily active users, time spent on AI services and AI-related transaction volume.”