Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

In this insight, we discuss the end of the one month lock up period and more block selling ahead by major investors for KakaoBank in the months ahead. The one month lock up period will end on 6 September for KakaoBank and some institutional investors may try to take some profits. There are 3.14 million shares that will no longer be under the lock up period for KakaoBank starting 6 September, which represents 0.7% outstanding shares.In addition, among the three largest shareholders of KakaoBank, we believe that there is an increasing probability of Korea Investment Asset Mgmt and KB Bank trying to unload partial stakes in KakaoBank once the 6 months lock-up period is over.

In this insight, we discuss the end of the one month lock up period and more block selling ahead by major investors for KakaoBank in the months ahead. The one month lock up period will end on 6 September for KakaoBank and some institutional investors may try to take some profits. There are 3.14 million shares that will no longer be under the lock up period for KakaoBank starting 6 September, which represents 0.7% outstanding shares.In addition, among the three largest shareholders of KakaoBank, we believe that there is an increasing probability of Korea Investment Asset Mgmt and KB Bank trying to unload partial stakes in KakaoBank once the 6 months lock-up period is over. 

KakaoBank - End of the 1 Month Lock Up Period & More Block Selling Ahead Likely by Major Investors

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.

Equity Capital Markets

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.KP began operation in Sep 2014 as a fintech division of Kakao to facilitate online payments. Ant Financial invested US$200m in the company in Feb 2017 and the division was spun out of Kakao in Apr 2017. Since spinning out, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.KP began operation in Sep 2014 as a fintech division of Kakao to facilitate online payments. Ant Financial invested US$200m in the company in Feb 2017 and the division was spun out of Kakao in Apr 2017. Since spinning out, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.

Kakao Pay IPO - Guided by Ant Financial to Be a Mini Ant

Cross Asset Strategy

<blockquote><a href="https://twitter.com/TimSweeneyEpic/status/1432647669864878083?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1432647669864878083%7Ctwgr%5E%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fwww.pcgamer.com%2Fsouth-korea-passes-law-with-major-implications-for-apple-vs-epic%2F" target="_blank" rel="noopener">Korea</a> is first in open platforms! Korea has rejected digital commerce monopolies and recognized open platforms as a right. This marks a major milestone in the 45-year history of personal computing. It began in Cupertino, but the forefront today is in Seoul. (Tim Sweeney - Founder of Epic Games)</blockquote>In a landmark case (an amendment of the Telecommunications Business Act), the <a href="https://www.wsj.com/articles/google-apple-hit-in-south-korea-by-worlds-first-law-ending-their-dominance-over-app-store-payments-11630403335" target="_blank" rel="noopener">Korean government</a> announced on 31 August that Google and Apple will need to open their app stores to alternative payment systems in South Korea. This change in regulation is likely to negatively impact Google and Apple's lucrative commissions on digital sales.A new bill was passed by the Korean National Assembly on 31 August which will significantly reduce Google and Apple's dominance of digital sales on their app platforms. The final step is for President Moon to sign this bill but it is almost a near certainty that he will sign this bill. The following are the major companies/sectors that could benefit from the change in law:<ul>
<li><a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a></li>
<li><a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a></li>
<li>Korean Telcos</li>
<li>Korean Game Companies</li>
<li>Korean Entertainment/Music/Movies/Drama Companies </li>
</ul>

Korea is first in open platforms! Korea has rejected digital commerce monopolies and recognized open platforms as a right. This marks a major milestone in the 45-year history of personal computing. It began in Cupertino, but the forefront today is in Seoul. (Tim Sweeney - Founder of Epic Games)In a landmark case (an amendment of the Telecommunications Business Act), the Korean government announced on 31 August that Google and Apple will need to open their app stores to alternative payment systems in South Korea. This change in regulation is likely to negatively impact Google and Apple's lucrative commissions on digital sales.A new bill was passed by the Korean National Assembly on 31 August which will significantly reduce Google and Apple's dominance of digital sales on their app platforms. The final step is for President Moon to sign this bill but it is almost a near certainty that he will sign this bill. The following are the major companies/sectors that could benefit from the change in law:
Naver Corp (035420 KS)
Kakao Corp (035720 KS)
Korean Telcos
Korean Game Companies
Korean Entertainment/Music/Movies/Drama Companies 


Korean Government Forces Google & Apple To Open Their App Stores to Alternative Payments

Korea Post plans to raise around US$947m via selling all of its 2.5% stake in <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a>. <div>We have covered various aspects of the deal in our previous notes:</div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/kakao-bank-ipo-riding-on-parent-s-network-but-boundaries-with-kakao-pay-remain-unclear" target="_blank" rel="noopener">Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear</a>, </li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-pricey-as-it-should-be" target="_blank" rel="noopener">Kakao Bank IPO - Pricey as It Should Be</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-lack-of-lock-up-and-msci-ftse-index-implications" target="_blank" rel="noopener">Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications, and</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-ipo-trading-one-for-instis-closer-look-at-ftse-and-msci-inclusion-remain-buyers" target="_blank" rel="noopener">Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers</a></li>
<li><a href="https://www.smartkarma.com/insights/kakao-bank-msci-done-missed-ftse-by-a-whisker" target="_blank" rel="noopener">Kakao Bank - MSCI Done, Missed FTSE by a Whisker</a></li>
</ul></div> In this note we will talk about the deal dynamics and provide updates since our previous note.

Korea Post plans to raise around US$947m via selling all of its 2.5% stake in KakaoBank (323410 KS). We have covered various aspects of the deal in our previous notes:

Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear, 
Kakao Bank IPO - Pricey as It Should Be
Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications, and
Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers
Kakao Bank - MSCI Done, Missed FTSE by a Whisker
 In this note we will talk about the deal dynamics and provide updates since our previous note.

Kakao Bank Placement - Its Expensive but the Discount Is Enticing

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

The KRX has announced the results of the September review of the BBIG indices and the changes will become effective after the close of trading on 9 September.These are the changes to the indices:<ul style="list-style-type: disc;">
<li>Secondary Battery ETF: <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> replaces <a href="https://www.smartkarma.com/entities/chunbo-co-ltd" target="_blank" data-smartkarma-citation="entities:27848:1" rel="noopener">Chunbo Co Ltd (278280 KS)</a>
</li>
<li>Bio ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> and <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a> join the index, replacing <a href="https://www.smartkarma.com/entities/shinpoong-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:7296:1" rel="noopener">Shinpoong Pharmaceutical (019170 KS)</a> and <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a>. Additionally, <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> replaces <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> in the top 3 stocks.</li>
<li>Internet ETF: <a href="https://www.smartkarma.com/entities/kg-inicis-co-ltd" target="_blank" data-smartkarma-citation="entities:5234:1" rel="noopener">KG Inicis Co Ltd (035600 KS)</a> replaces <a href="https://www.smartkarma.com/entities/rsupport-co-ltd" target="_blank" data-smartkarma-citation="entities:14783:1" rel="noopener">Rsupport Co Ltd (131370 KS)</a> </li>
<li>Game ETF: <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> and <a href="https://www.smartkarma.com/entities/devsisters-co-ltd" target="_blank" data-smartkarma-citation="entities:14096:1" rel="noopener">Devsisters (194480 KS)</a> replace <a href="https://www.smartkarma.com/entities/wemade-co-ltd" target="_blank" data-smartkarma-citation="entities:9940:1" rel="noopener">Wemade Co., Ltd. (112040 KS)</a> and <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a>
</li>
<li>BBIG ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> replace <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>.</li>
</ul>KRX has broken its own rules (everyone does it, so join in!) by including <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> even though the stock listed post the July-end cut off and there is no provision of Fast Entry in the index methodology.Stocks with the largest inflows are <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a>, <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a> and <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a> while the stocks with the largest outflows are <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a>, <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>, <a href="https://www.smartkarma.com/entities/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical Co Ltd (003670 KS)</a>, <a href="https://www.smartkarma.com/entities/skc-co-ltd" target="_blank" data-smartkarma-citation="entities:3970:1" rel="noopener">SKC Co Ltd (011790 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a>.<a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> is also a Fast Entry to the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> and there will be passive buying from those trackers as well.

The KRX has announced the results of the September review of the BBIG indices and the changes will become effective after the close of trading on 9 September.These are the changes to the indices:
Secondary Battery ETF: SK IE Technology (361610 KS) replaces Chunbo Co Ltd (278280 KS)

Bio ETF: SK Bioscience (302440 KS) and Hanmi Pharm (128940 KS) join the index, replacing Shinpoong Pharmaceutical (019170 KS) and Seegene Inc (096530 KS). Additionally, SK Bioscience (302440 KS) replaces SK Biopharmaceuticals Co Ltd (326030 KS) in the top 3 stocks.
Internet ETF: KG Inicis Co Ltd (035600 KS) replaces Rsupport Co Ltd (131370 KS) 
Game ETF:  Krafton Inc (259960 KS) and Devsisters (194480 KS) replace Wemade Co., Ltd. (112040 KS) and Neptune Company (217270 KS)

BBIG ETF: SK Bioscience (302440 KS) and  Krafton Inc (259960 KS) replace SK Biopharmaceuticals Co Ltd (326030 KS) and Kakao Games Corp (293490 KS).
KRX has broken its own rules (everyone does it, so join in!) by including  Krafton Inc (259960 KS) even though the stock listed post the July-end cut off and there is no provision of Fast Entry in the index methodology.Stocks with the largest inflows are SK Bioscience (302440 KS),  Krafton Inc (259960 KS), SK IE Technology (361610 KS), LG Chem Ltd (051910 KS), SK Innovation (096770 KS) and Douzone Bizon (012510 KS) while the stocks with the largest outflows are Kakao Games Corp (293490 KS), SK Biopharmaceuticals Co Ltd (326030 KS), Kakao Corp (035720 KS), Posco Chemical Co Ltd (003670 KS), SKC Co Ltd (011790 KS) and Samsung SDI (006400 KS). Krafton Inc (259960 KS) is also a Fast Entry to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and there will be passive buying from those trackers as well.

KRX BBIG Index Rebalance: Krafton, SK Bioscience, SK IE Tech Included (Among Others)

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)

KakaoBank - End of the 1 Month Lock Up Period & More Block Selling Ahead Likely by Major Investors

There are 3.14 million shares that will no longer be under the lock up period for KakaoBank starting 6 September, which represents 0.7% outstanding...

Douglas Kim

Kakao Pay IPO - Guided by Ant Financial to Be a Mini Ant

Kakao Pay, one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao holds a...

Sumeet Singh

Korean Government Forces Google & Apple To Open Their App Stores to Alternative Payments

In a landmark case, the Korean government announced on 31 August that Google and Apple will need to open their app stores to alternative payment...

Douglas Kim

Kakao Bank Placement - Its Expensive but the Discount Is Enticing

Korea Post plans to raise around US$947m via selling all of its 2.5% stake in KakaoBank (323410 KS). This is a clean-up trade.

Sumeet Singh

KRX BBIG Index Rebalance: Krafton, SK Bioscience, SK IE Tech Included (Among Others)

Krafton has been added to the Game index, SK IE Tech added to the Battery index, SK Bioscience to the Bio index. Lots of flow on some names....

Brian Freitas

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