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| Kakao Bank headquarters located in Pangyo / Korea Times file /2021-01-28(코리아타임스) |
By Anna J. Park
As Kakao Bank prepares for its initial public offering (IPO) to take place sometime this year, market watchers are eyeing whether the company's large shareholders would sell their stakes in the internet bank before the IPO, causing a stock overhang.
A stock overhang happens when a massive amount of shares are offloaded by shareholders who hold a large stake, depressing the share price as the amount dilutes the stock's value.
Concerns about overhanging stocks are being voiced because market insiders suspect that internet-based bookstore YES24 ― one of the large shareholders of the mobile bank ― might further sell its shares to venture capital companies.
YES24 announced that it sold around 1.93 million shares of Kakao Bank for 48.4 billion won ($43.4 million) to a private equity firm (PEF). With the sales, YES24 currently holds 1.4 percent of the bank's shares, or 5.68 million shares.
Given the online-based bookstore company's deteriorated finance situation, venture capital companies are said to be suggesting the firm sell additional Kakao Bank shares.
"Investors are suggesting YES24 to sell Kakao shares, as they know the firm has a tight budget and is in need of liquidity," a market insider said. "There's a possibility that YES24 might sell part of its stake once again, if prices are met."
If such a deal is done, however, concerns are raised that it could trigger overhanging of the bank's stock. Once the stock is listed, pre-IPO investors need to follow certain lock-up periods, and given the market's volatility, investors' profit-taking could face further uncertainty according to market conditions during the lock-up period. That's why YES24's possible additional selloff of the shares could trigger a set of other financial investors to retrieve their profits prior to the IPO.
Many market watchers are pretty skeptical that the company's market cap could rise further soon, as this is way higher than when the firm's corporate value was calculated at around 10 trillion won when the bank issued new stocks late last year.
If YES24's holdings of Kakao Bank shares are calculated with Thursday's OTC market price, it means they have around 400 billion won worth of shares. Given that YES24's total amount of money invested in the mobile-based bank so far is around 32.5 billion won, the rate of returns seem pretty enticing, although the OTC market price would not exactly match up with actual selling prices.
Currently, Kakao holds the largest amount of shares at 31.8 percent, followed by Korea Investment Value Asset Management at 27.1 percent, KB Kookmin Bank at 9.1 percent, Korea Investment Holdings at 4.7 percent. Netmarble, Seoul Guarantee Insurance Company, Korea Post, eBay Korea, Tencent all hold 3.5 percent stakes, including a few more equity firms with smaller stakes.
