Could Dunamu's Nasdaq ambitions gain new life through Naver Financial?

Dunamu Chairman Song Chi-hyung speaks at the Upbit D Conference 2019 at Grand Hyatt Incheon in this September 2019 photo. Newsis

Dunamu's long-held ambitions for a Nasdaq listing are regaining momentum, as ongoing merger talks with Naver Financial raise the possibility of a more competitive corporate valuation, analysts said Wednesday.

"If a merger and equity swap between Dunamu and Naver were to take place, Dunamu Chair Song Chi-hyung would become the largest shareholder of Naver based on his stake in the merged entity, while Dunamu and Naver Financial would secure a pathway toward a potential Nasdaq listing," said Jo Tae-na, an analyst at Eugene Investment & Securities.

"It’s seen as the best win-win strategy," Jo added.

According to sources familiar with the matter, the two companies are in advanced talks to execute a comprehensive equity swap that would give Naver’s financial arm full ownership of Dunamu, the operator of the world’s fourth-largest cryptocurrency exchange Upbit.

The proposed deal would enable Naver Financial to launch a comprehensive digital finance platform that integrates payments, e-commerce and cryptocurrency trading, while positioning Dunamu more favorably for entry into global capital markets.

"For existing Dunamu shareholders, a global listing after the merger is seen as more attractive than a standalone listing," Jo said. "As the scale grows, and the story expands, the market will assign a much higher value."

Analysts project the merged company could command a valuation 1.5 to 2 times higher than Dunamu alone, with estimates ranging from 40 to 50 trillion won ($28.5 to 35.6 billion).

Regardless of the initial public offering, there is a strong likelihood that Song will become the largest shareholder of Naver Financial, and eventually of Naver itself. The merger is also seen as part of Naver founder and board chair Lee Hae-jin’s efforts to transfer controlling ownership and management rights to Song.

The Nasdaq logo is seen at the Nasdaq market in New York, Sept. 16. Reuters-Yonhap

The market currently values Dunamu and Naver Financial at a ratio of roughly 4 to 1. If a stock swap is carried out based on that ratio, Song would acquire a 20.4 percent stake in the merged entity, positioning him as its largest shareholder.

Despite speculation that Lee intends to first integrate Naver Financial with Dunamu and then fully merge the combined unit with Naver, analysts expect a more straightforward equity swap between Song and Naver to take place.

"A swap (between Naver and Song's stake in the merged entity) alone is enough to establish the governance structure," Jo said. "There’s little reason to pursue a more complicated approach that might invite shareholder backlash, regulatory scrutiny or the burden of a re-listing review."

Nevertheless, the main obstacles are regulatory issues. There is currently no legal framework for merging an electronic financial services provider with a virtual asset operator, and financial authorities have long upheld the principle of separating traditional finance from virtual assets.

"What’s certain is that both Naver and Dunamu are strongly committed to this deal," said Choi Seung-ho, an analyst at DS Investment & Securities. "Even if legal or regulatory roadblocks delay a formal merger, the two are expected to maintain a de facto partnership and continue expanding their businesses together."

Reflecting renewed investor optimism, Dunamu's over-the-counter shares surged to 405,000 won during intraday trading on Tuesday — their highest level since April 2022. As of 3 p.m. Wednesday, shares were trading at 385,500 won.

In contrast, Naver's stock closed at 254,500 won on Wednesday, marking a 5.21 percent decline from the previous trading day. Investors are concerned that the benefits of a potential merger with Dunamu may not directly translate into gains for Naver’s parent company.