Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Service disruptions likely to hit Kakao's stock price
Firefighters respond to a fire at SK C&C's Pangyo facility in Seongnam, Gyeonggi Province, Saturday. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Kakao, the operator of Korea's dominant mobile messenger app KakaoTalk, is expected to face a Black Monday-esque scenario after its services were shut down for more than 10 hours, the longest-ever service outage in its history.
The company is considered one of the major growth stocks, enjoying a super-rally in 2021 due to excess liquidity at the time. But its upward momentum hit a snag at the beginning of 2022 as a consequence of the rapid pace of the rate hikes implemented by the U.S. Federal Reserve and the Bank of Korea.
According to the Korea Exchange, Kakao's share price peaked at 170,000 won in June last year, but has since lost steam. Its value tumbled below 50,000 won last week. Kakao shares closed at a new low of 47,300 won on Thursday for the first time since June 2020, though they soon bounced back to 51,400 won the following day on a technical rally.
Friday's rise was raising hopes of a long-awaited rebound. But those hopes are unlikely to last long after a major fire broke out on Saturday at SK C&C's Pangyo facility in Seongnam, Gyeonggi Province, which houses data centers of various IT companies including Kakao. It took around eight hours to extinguish the fire. The KakaoTalk messenger service, widely used in Korea, was unavailable during the period.
Even though KakaoTalk resumed limited text-only service early Sunday morning, users still faced challenges transferring photos and videos over the weekend.
Given the scale of the impact on the more than 45 million users here, the latest fiasco is widely expected to pull down the firm's stock price this week. According to data from the company, the number of KakaoTalk's monthly active users surpassed 47 million in Korea ― more than 90 percent of the population here.
Kakao was also hit with a triple whammy, as the data center fire disrupted its other major services, such as KakaoBank and Kakao Pay. The exact volume of the damage has yet to be calculated, but users couldn't gain access to financial services operated by the financial firms of Kakao due to the accident.
Shares of the two financial affiliates of Kakao have also shown similar downward trends during the past year on the weak growth outlook of Kakao. The share price of KakaoBank, the nation's largest mobile lender, soared to over 90,000 won shortly after it went public last year, but its valuation fell to below 20,000 won eventually. Kakao Pay shares also topped 200,000 won late last year, but then plummeted below 40,000 won.
“We will do our utmost to normalize all the functions of our services,” Kakao said in a statement, Sunday.