Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

<p>It has been reported that Kakao Pay is considering delaying its listing to September. This is because of the 135-day rule that a company undergoing an IPO must complete the listing procedure within 135 days from the date of preparation of the financial statements.</p><div class="content-highlight"><p><strong>According to this regulation, Kakao Pay must complete the listing within August 13, 135 days from the date of the 1Q21 financial statements.</strong></p></div><hr><h2>What is the 135-day rule?</h2><p><strong>The 135-day rule is a rule on the expiration date of accounting settlement data reflected in the IPO prospectus and the securities declarations for overseas investors.</strong></p><p>The important point here is that KRX does not have any rule similar to the 135 rule.</p><p>On the other hand, the US Securities and Exchange Commission stipulates that all listing schedules, including payment, be completed within 135 days from the time the financial statements stated in the IPO prospectus are prepared.</p><p><strong>So why should Kakao Pay care about the 135-day rule?</strong></p><div class="content-highlight"><p><strong>This rule does not apply to domestic investors, but it inevitably applies when a newly listed company with a large IPO size needs to raise funds abroad that are within the jurisdiction of the SEC.</strong></p></div><h2>When is the deadline for the initial IPO prospectus?</h2><p>If listing proceeds based on the financial statements at the end of the first quarter, March 31 will become the base date. So, the last business day of the 135-day rule will be <strong>August 13</strong>.</p><div class="content-highlight"><p><strong>For this reason, Kakao Pay's listing date was set for August 12, despite concerns about overlapping demand with Kakao Bank.</strong></p></div><p>That is, August 12, the scheduled listing date of Kakao Pay, was a really tight schedule. Therefore, the fact that the Financial Supervisory Service requested a revised report was risking that the listing schedule would be significantly pushed back.</p><h2>How long will the schedule be delayed?</h2><p>In the end, the 135-day rule was not met based on the 1Q financial statements, so the IPO prospectus has to be rewritten based on the 2nd quarter financial statements.</p><p><strong>This means that the IPO schedule has to be adjusted in line with the submission of the 2Q financial report to be published in mid-August.</strong></p><div class="content-highlight"><p><strong>In this case, considering that it will take at least a month or more to complete the listing process, including the FSS review period, it is expected that the company will be listed at the end of September at the earliest. In other words, at this point, the possibility of an October listing should remain open.</strong></p></div>

It has been reported that Kakao Pay is considering delaying its listing to September. This is because of the 135-day rule that a company undergoing an IPO must complete the listing procedure within 135 days from the date of preparation of the financial statements.According to this regulation, Kakao Pay must complete the listing within August 13, 135 days from the date of the 1Q21 financial statements.What is the 135-day rule?The 135-day rule is a rule on the expiration date of accounting settlement data reflected in the IPO prospectus and the securities declarations for overseas investors.The important point here is that KRX does not have any rule similar to the 135 rule.On the other hand, the US Securities and Exchange Commission stipulates that all listing schedules, including payment, be completed within 135 days from the time the financial statements stated in the IPO prospectus are prepared.So why should Kakao Pay care about the 135-day rule?This rule does not apply to domestic investors, but it inevitably applies when a newly listed company with a large IPO size needs to raise funds abroad that are within the jurisdiction of the SEC.When is the deadline for the initial IPO prospectus?If listing proceeds based on the financial statements at the end of the first quarter, March 31 will become the base date. So, the last business day of the 135-day rule will be August 13.For this reason, Kakao Pay's listing date was set for August 12, despite concerns about overlapping demand with Kakao Bank.That is, August 12, the scheduled listing date of Kakao Pay, was a really tight schedule. Therefore, the fact that the Financial Supervisory Service requested a revised report was risking that the listing schedule would be significantly pushed back.How long will the schedule be delayed?In the end, the 135-day rule was not met based on the 1Q financial statements, so the IPO prospectus has to be rewritten based on the 2nd quarter financial statements.This means that the IPO schedule has to be adjusted in line with the submission of the 2Q financial report to be published in mid-August.In this case, considering that it will take at least a month or more to complete the listing process, including the FSS review period, it is expected that the company will be listed at the end of September at the earliest. In other words, at this point, the possibility of an October listing should remain open.

Accurate Facts About the Application of Kakao Pay's 135-Day Listing Date Rule

<p>In a regulatory filing on July 16 (later today), the Financial Supervisory Service said that it had requested Kakao Pay to revise its IPO prospectus. As a result, the IPO prospectus submitted by Kakao Pay earlier this month has been suspended.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/218/913/original/Screen+Shot+2021-07-16+at+10.12.05+AM.png?1626444842" class="editor-image img-responsive" data-smartkarma-image-id="218913"></figure></section><p>Kakao Pay must submit a revised report within three months, and if it is not submitted, it is considered a withdrawal of the public offering.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/218/914/original/Screen+Shot+2021-07-16+at+10.20.56+AM.png?1626445364" class="editor-image img-responsive" data-smartkarma-image-id="218914"></figure><div class="content-highlight"><p><a href="http://dart.fss.or.kr/dsaf001/main.do?rcpNo=20210716100004" target="_blank" rel="noopener">Here is the link to the regulatory filing. (DART)</a></p></div></section>

In a regulatory filing on July 16 (later today), the Financial Supervisory Service said that it had requested Kakao Pay to revise its IPO prospectus. As a result, the IPO prospectus submitted by Kakao Pay earlier this month has been suspended.Kakao Pay must submit a revised report within three months, and if it is not submitted, it is considered a withdrawal of the public offering.Here is the link to the regulatory filing. (DART)

Kakao Pay to Revise Offering Price: Reasons & Schedule Impacts on Kakao Bank & Krafton

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p>On 16 July, FSS (Financial Supervisory Service) requested <a href="https://www.sedaily.com/NewsView/22OXPDP6O5" target="_blank" rel="noopener">Kakao Pay</a> to revise the IPO prospectus filings and postpone the IPO process. The book building for Kakao Pay was originally supposed to start on 29 July. Now, this will get postponed. </p>
<p>One of the key reasons why FSS has decided to postpone the Kakao Pay IPO is likely because of the numerous complaints from institutional investors that the IPO price range (especially high end) is too high. As a result, FSS requested the correction and supplementation of the IPO filing submitted by Kakao Pay. </p>
</div>


On 16 July, FSS (Financial Supervisory Service) requested Kakao Pay to revise the IPO prospectus filings and postpone the IPO process. The book building for Kakao Pay was originally supposed to start on 29 July. Now, this will get postponed. 
One of the key reasons why FSS has decided to postpone the Kakao Pay IPO is likely because of the numerous complaints from institutional investors that the IPO price range (especially high end) is too high. As a result, FSS requested the correction and supplementation of the IPO filing submitted by Kakao Pay. 


FSS Requests Kakao Pay to Revise IPO Filings & Postpone IPO Process

<p>Kakao's two financial affiliates, Kakao Bank and Kakao Pay, are about to go public at the same time next month. As of the listing date, there is an interval of only one week.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"IPO schedule"}'>IPO schedule</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Kakao Bank"}'>Kakao Bank</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Kakao Pay"}'>Kakao Pay</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44413}' data-sheets-numberformat='{"1":5,"2":"mm. dd","3":1}'><strong>08. 05</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44420}' data-sheets-numberformat='{"1":5,"2":"mm. dd","3":1}'><strong>08. 12</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p><strong>This poses a dilemma for local institutional investors. This is because if institutions hold both at their originally allocated weight, risk exposure to a specific sector (financial industry) and a specific corporate group (Kakao Group) will suddenly increase.</strong></p><p>In fact, concerns are being raised that the business scope of Kakao Bank and Kakao Pay may overlap too much. Although their current main business is different, they are aiming for almost the same business direction to expand into a comprehensive financial platform through a medium called Kakao Talk.</p><div class="content-highlight"><ul>
<li>The symbolic point of conflict in the evolution of business areas is the MyData Project that the government is promoting. MyData is a business that provides customized financial services by collecting personal credit information scattered across banks, insurance companies, and credit card companies.</li>
<li>Kakao Bank has decided to launch its own MyData business and is preparing to apply for a license for this. Kakao Pay has already obtained a preliminary business license for MyData.</li>
</ul></div><p><strong>As such, this overlapping business area in the not-too-distant future worsens the severity of risk exposure to the same sector/corporate group.</strong></p>

Kakao's two financial affiliates, Kakao Bank and Kakao Pay, are about to go public at the same time next month. As of the listing date, there is an interval of only one week.







IPO schedule
Kakao Bank
Kakao Pay


Listing
08. 05
08. 12

Source: DART &amp; KRX

This poses a dilemma for local institutional investors. This is because if institutions hold both at their originally allocated weight, risk exposure to a specific sector (financial industry) and a specific corporate group (Kakao Group) will suddenly increase.In fact, concerns are being raised that the business scope of Kakao Bank and Kakao Pay may overlap too much. Although their current main business is different, they are aiming for almost the same business direction to expand into a comprehensive financial platform through a medium called Kakao Talk.
The symbolic point of conflict in the evolution of business areas is the MyData Project that the government is promoting. MyData is a business that provides customized financial services by collecting personal credit information scattered across banks, insurance companies, and credit card companies.
Kakao Bank has decided to launch its own MyData business and is preparing to apply for a license for this. Kakao Pay has already obtained a preliminary business license for MyData.
As such, this overlapping business area in the not-too-distant future worsens the severity of risk exposure to the same sector/corporate group.

Kakao Bank & Kakao Pay Listings in Close Proximity: Institutional Cannibalization Risk

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<p><a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (1349010D KS)</a> (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> held a 31.62% stake prior to listing.</p><p>Kakao Bank is a digital-bank which counts Kakao as its main shareholder. It is a branchless digital bank that only started operations in 2017. As of Mar 21, it had a loan book of US$18.8bn, deposit base of US$21.1bn. It had 16.5m customers as of May 21.</p>

KakaoBank (1349010D KS) (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao Corp (035720 KS) held a 31.62% stake prior to listing.Kakao Bank is a digital-bank which counts Kakao as its main shareholder. It is a branchless digital bank that only started operations in 2017. As of Mar 21, it had a loan book of US$18.8bn, deposit base of US$21.1bn. It had 16.5m customers as of May 21.

Kakao Bank IPO - Riding on Parent's Network but Boundaries with Kakao Pay Remain Unclear

South Korea

Kakao Corp. provides Internet portal services such as news, free e-mail, and leisure information.  The Company also offers cross-platform mobile messaging application that allows users to exchange messages.

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Kakao Corp (035720 KS)

Accurate Facts About the Application of Kakao Pay's 135-Day Listing Date Rule

This post provides accurate facts about the application of Kakao Pay's 135-Day listing date rule and discusses the reasons behind the FSS's...

Sanghyun Park

Kakao Pay to Revise Offering Price: Reasons & Schedule Impacts on Kakao Bank & Krafton

In a regulatory filing on July 16, the Financial Supervisory Service said that it had requested Kakao Pay to revise its IPO prospectus.

Sanghyun Park

FSS Requests Kakao Pay to Revise IPO Filings & Postpone IPO Process

On 16 July, FSS requested Kakao Pay to revise the IPO prospectus filings and postpone the IPO process. It is likely that the IPO price range of...

Douglas Kim

Kakao Bank & Kakao Pay Listings in Close Proximity: Institutional Cannibalization Risk

This post discusses local institutional investors' dilemma resulting from the fact that Kakao Bank and Kakao Pay's listing dates are close to each...

Sanghyun Park

Kakao Bank IPO - Riding on Parent's Network but Boundaries with Kakao Pay Remain Unclear

KakaoBank (1349010D KS) (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao Corp (035720 KS) held...

Sumeet Singh

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