Kakao's move to sell Kakao mobility shares draws protest

Unionized workers of Kakao Mobility hold a press conference in Seoul, Monday. Yonhap

By Lee Kyung-min

IT giant Kakao is coming under intense criticism over its plan to sell off over 10 percent of its stake in its mobility affiliate to a private equity fund (PEF), according to industry and firm officials, Monday. Kakao owns a majority stake in Kakao Mobility, the operator of the ride-hailing service app Kakao T, which has an estimated total value of about 8.5 trillion won ($6.5 billion).

Kakao characterizes the move as a business strategy to reorganize its corporate portfolio and financials, a much-needed breakthrough to navigate a bout of risks involving a sharp fall in the share prices of the firm and its key affiliates, amid allegations of business overreach at the expense of smaller market players.

However, employees of the mobility affiliate call it an irresponsible tactic to altogether dodge accountability for the recent failures in corporate performances and rapidly souring public sentiment.

Whether the escalating conflict will dial down remains to be seen, as it will be managed by the Corporate Alignment Center (CAC), a body of Kakao overseeing its subsidiaries.

The CAC will hold a meeting with mobility employees soon, according to an industry watcher close to the matter, in an attempt to address concerns about the firm essentially making a hefty short-term profit at the expense of workers left vulnerable to pay cuts and layoffs.

Kakao Executive Vice President Bae Jae-hyun said in a July 6 message on the firm's intranet that it “is considering selling off about 10 percent of Kakao Mobility shares, thereby becoming the second-largest shareholder of its mobility affiliate.”

Up in arms

Unionized workers of Kakao Mobility held a press conference in Seoul, blasting Kakao's plan to sell part of its 57.5 percent stake in the mobility affiliate to MBK Partners, a local PEF.

“Behind the rapid growth of Kakao, Korea's leading platform operator, were the blood and sweat of numerous workers,” the workers said.

Little progress has been made since Kakao was criticized for lacking social responsibility blinded by a profit-driven business model, they added, a lingering mismanagement issue exceeded only by the firm being desperate to find a “quick way out” with total disregard for the job security of hard-working employees.

“The private equity fund will have no interest in fulfilling its social responsibilities. Kakao Mobility workers will have to bear the full brunt of the risks certain to entail the selling of the shares.”

Other financial investors of the mobility affiliate are TPG consortium and Carlyle, with stakes of 29 percent and 6.2 percent, respectively.

Industry watchers say Kakao's sell-off move followed the delayed listing of the mobility affiliate due to the recent tightening of the initial public offering (IPO) market, compounded by the mobility affiliate's management risks.

Kakao acknowledged that the sales plan is under discussion. “Some media outlets speculated that we would sell a significant number of shares, but it will be in the 10 percent range,” a Kakao spokesperson said.