Kakao Pay shares plummet amid data leak scandal

Kakao Pay and Korea Exchange (KRX) officials celebrate Kakao Pay's KOSPI listing at the KRX building in Seoul in this November 2021 photo. Newsis

Kakao Pay shares, which have already been hovering at record lows, are trending downward again following allegations that domestic consumer credit information was leaked to Alipay.

The latest setback is expected to further strain the company, despite efforts to bolster its stock price, according to market watchers, Wednesday.

According to the Korea Exchange, Wednesday, the stock price of Kakao Pay closed at 24,100 won ($17.71), up 2.34 percent from Tuesday.

However, the slight uptick was insufficient to recover Tuesday's losses, which followed an announcement by the Financial Supervisory Service. The regulator accused Kakao Pay of transferring the data of 40 million users to Alipay from April 2018 to the present without their consent.

Although Kakao Pay explained that the information being shared was necessary for payment processing and did not legally require user consent, the market responded with a wave of selling. Kakao Pay's share price plunged 5.61 percent following the revelation compared to the previous session.

These new allegations exacerbate the company's problems. Kakao Pay's stock had already been struggling. After reaching a yearly intraday high of 60,200 on Jan. 11, it plummeted by over 60 percent in just seven months.

This is partly due to the recent arrest of Kakao founder Kim Beom-su, which has cast a shadow over the company's future business prospects. If Kim receives a penalty exceeding a fine, financial regulators may reassess Kakao Corp.'s eligibility to remain the largest shareholder of Kakao Pay.

Last December, Kakao Pay had to terminate an acquisition deal with Siebert Financial Corp., a New York Stock Exchange-listed investment consultancy, amid legal struggles surrounding Kim and Kakao Corp.

Kakao Corp's office in Seongnam, Gyeonggi Province / Newsis

Another concern is the potential financial losses related to prolonged settlement delays involving TMON and WeMakePrice.

Market watchers cautiously expect that payment gateway providers like Kakao Pay may be forced to absorb losses as both e-commerce firms have filed for corporate rehabilitation. Kakao Pay intends to reflect the associated losses in its financial statements during the second half of this year.

The current situation starkly contrasts with the rosy outlook when Kakao Pay first entered the benchmark KOSPI. After going public in November 2021, its stock price doubled to 180,000 at the opening. At its peak, it traded at around 240,000 won, so popular that it earned the nickname "national stock."

However, just a month after its IPO, the stock nosedived 170,000 won due to controversy surrounding the management's cash-out incident. Eight members of its management team, including the CEO, sold off all their shares and reaped the profits.

The stock has continuously declined since then despite minor fluctuations.

Management's commitment to bolstering its struggling stock is strong. Upon his inauguration in 2022, Kakao Pay CEO Shin Won-keun announced that he would only receive the minimum wage until the company's stock price reached 200,000 won.

Shinhan Securities analyst Lim Hee-yeon noted that for its stock price to rise significantly, the company needs to achieve growth accompanied by improved profitability, along with its subsidiaries turning profitable.