Delayed Kakao Pay IPO feared to decrease profits for Samsung Securities

A Samsung Securities branch in Seoul is seen in this 2018 file photo. Yonhap

By Park Jae-hyuk

Samsung Securities could see a decrease in profits due to another delay in the planned initial public offering (IPO) of Kakao Pay amid strengthened regulations on financial services platforms. The Korean brokerage is the lead underwriter of the IPO along with JPMorgan and Goldman Sachs.

Kakao Pay said Sunday its listing on the benchmark KOSPI market has been postponed again to Nov. 3, following a decision to modify its prospectus in compliance with a revised Financial Consumer Protection Act that went into effect Saturday.

The revised act requires financial services platforms like Kakao Pay to stop comparing financial products and provide recommendations until they receive a license to conduct such businesses.

The mobile payment service provider initially submitted its prospectus in July aiming to go public in August. But after the Financial Supervisory Service (FSS) demanded an adjustment to the document, Kakao Pay lowered the target IPO price range and submitted a modified one, Aug. 31, putting off its IPO to Oct. 14.

Its latest decision to delay the IPO came after the company halted some services that could be seen as violating the new regulations designed to protect financial consumers.

“We updated the investment risk factors for our investors to fully understand the improvements in our services following the implementation of the Financial Consumer Protection Act,” a Kakao Pay official said in a statement. “Even after the IPO, we will take the lead in protecting financial consumers, accelerating our efforts for innovative growth.”

After Kakao Pay announced its plan to go public last year, multiple securities firms regarded the IPO as a lucrative opportunity. When Samsung Securities was selected as its lead underwriter, the brokerage was also expected to enhance its capacity to deal with mega-size deals.

Kakao Pay's previous decision to lower the target price range, however, led Samsung Securities to face a decrease in the amount of commission it will receive after the IPO.

The fintech firm had sought to price its stock between 63,000 won ($53) and 96,000 won, but proposed a price between 60,000 won and 90,000 won in a corrected prospectus in August.

Moreover, Kakao Pay added Korea Investment & Securities and Shinhan Investment to the group of underwriters at that time, decreasing the amount of shares distributed to the lead underwriters ― Samsung Securities, JPMorgan and Goldman Sachs.

Fortunately for Samsung Securities, Kakao Pay decided to maintain the target IPO price range in the latest modification of its prospectus.

However, it remains unclear whether the fintech firm will be able to attract enough investments on the stock market amid the strengthened regulations on online platform operators. If investors shun betting on Kakao Pay, the underwriters will fail to hit the jackpot from the IPO.

Such a scenario can be a blessing in disguise for KB Securities, which had served as the lead underwriter for Kakao Pay's IPO, until it lost the status last December to serve as the lead underwriter for KakaoBank's IPO. Back then, KB Securities was replaced by Samsung Securities to avoid a possible conflict of interest.

Earlier this year, Kakao Pay was considered to have a higher growth potential than KakaoBank, given that most of the internet-only bank's products were advertised on the mobile payment platform.

At this moment, Kakao Pay is still facing uncertainties over its IPO, while KakaoBank successfully went public in August and became the nation's largest financial company in terms of market cap.