Reporter's Notebook For whom did Kakao Pay go public?
From left, Kakao Pay Chief Business Officer Lee Jin, Chief Financial Officer Chang Ki-joo, CEO Ryu Young-joon, Chief Strategy Officer Shin Won-keun, and Chief Product Officer Lee Seung-hyo. The five executives, along with three other key management members, are being criticized for hastily exercising their stock options just a month after the firm's listing in early November. / Courtesy of Kakao Pay
IPOs aimed at easy money-making for executives
By Anna J. Park
Just slightly over a month after Kakao Pay's KOSPI debut in early November, the company's key management figures cashed out with billions of won by recently exercising their stock options. Although the exercise of stock options is completely legal, the collective stock option selling by all members of management a month following the firm's listing has raised investors' eyebrows. In the history of the KOSPI, it has been very rare to see management vesting their stock options just a month after a firm's listing.
According to the Financial Supervisory Service's (FSS) electric public disclosure system, DART, eight executive members, including current CEO Ryu Young-joon (who also goes by the English name Alex Ryu), sold a total of 440,993 shares of Kakao Pay for around 90 billion won ($76 million) late last week. The amount was part of the executive members' stock options exercised in late November, just three weeks after Kakao Pay's public listing, and the stocks were all sold late last week.
Given that the options gave the executive members the right to purchase stocks at 5,000 won per share, they were able to rake in over 40 times their originally investment, as they sold them for 203,704 won per share, on average.
Ryu raked in the largest amount of about 46.9 billion won, by selling 230,000 shares, or about 32 percent of his entire stock options, according to the firm's prospectus distributed during the IPO. Lee Jin, the company's chief business officer and vice president, also took in 15.3 billion won, as he sold 75,193 shares, slightly over one-third of his options
Chief Technology Officer Na Ho-yeol sold 35,800 shares, nearly 20 percent of his stock options available, for 7.3 billion won; while Chief Strategy Officer Shin Won-keun, Creative Director and Vice President Lee Ji-hong, and Chief Financial Officer Chang Ki-joo each reaped 6.1 billion won, as they sold 30,000 of their respective shares. The amount is about a third of their entire stock options.
CSO Shin has also been appointed to lead Kakao Pay as its new CEO from next March. In other words, both current CEO Ryu and Shin, the company's next CEO, sold about 30 percent of their stock options. Current CEO Ryu has been appointed to lead Kakao, the parent company of Kakao Pay, from next March.
Chief Product Officer Lee Seung-hyo and Management Administration Director Chun Hyun-sung each sold 5,000 shares, about 7 percent of their respective stock options.
As the key management's collective exercise of their options burdened the supply, Kakao Pay's stock price logged a losing streak during two consecutive trading sessions, falling 6 percent at last Friday's close and 3.06 percent, Monday.
While it is entirely legal to grant compensatory equity awards such as stock options to motivate or attract quality employees for the maximization of a company's growth, Kakao Pay management's decision to sell them early, only a month after the company's listing, has brought forth a lot of criticism.
In addition, the day they sold their shares coincided with the day that the firm was included in the KOSPI 200 index. This inclusion means that the firm's stock is now exposed to short-selling, and thus, the decision to sell their stocks that day reflected their judgment that the current price was overvalued compared to the firm's internal valuation.
Angry retail investors decried the fact that the key management seemed to have more interest in cashing in part of their profits, than in protecting the stock price against short-selling attacks.
“Key management members' selling of a large amount of stocks signals that the current stock price has reached its peak,” an investor wrote on Naver's online stock discussion board.
“It is truly annoying that management members exercised their stock options just over a month after the listing,” another retail investor wrote, condemning the management's actions.
Some raised the criticism that the listing of the company benefited only key management members who had excessive stock options, saying that only they became rich through the IPO.
Kakao Pay explained that its management only sold part of their stocks options, not the entirety of their holdings.
However, the management cannot be free from retail investors' complaints that they cared more about pocketing their own profits, rather than buttressing the firm's stock price and corporate value. Their hasty exercise of the stock options raises questions about who the company went public for in the first place.