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.

Event-Driven

<p>There is a lot of confusion about exactly in which areas Kakao is under investigation by the Fair Trade Commission.</p><div class="content-highlight"><p><strong>The Fair Trade Commission is investigating K Cube Holdings from two angles.</strong></p></div><hr><h2>First: Non-disclosure of data on affiliates</h2><p>The FTC requires every business group whose total assets exceed ₩10T to submit data on all affiliates to designate a cross-ownership restricted business group every year. In particular, the FTC requires detailed shareholder status data for companies (wholly or partially) owned by the family members of the head of a business group.</p><p>This purpose is clear. This is intended to regulate the exploitation of private interests by an owner family. That is, the FTC intends to prevent an unfair transfer of wealth.</p><div class="content-highlight">
<p><strong>However, the Fair Trade Commission argues that detailed data on K Cube Holdings, the de facto holding company of Kakao, have not been submitted for a long time.</strong></p>
<p><strong>The FTC is planning to intensively investigate whether K Cube Holdings has received profits from Kakao in an unfair way.</strong></p>
</div><p>K Cube Holdings was established in January 2007 for the purpose of software development, and Kim Beom-soo (Kakao founder and chairman) owns 100% of the shares. K Cube Holdings currently owns a 10.59% stake in Kakao.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Kakao shareholding"}'>Kakao shareholding</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kim Beom-su"}'>Kim Beom-soo</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1329}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>13.29%</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"K Cube Holdings"}'><strong>K Cube Holdings</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1057}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>10.57%</strong></td>
</tr>
<tr><td colspan="2"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NPS"}'>NPS</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.084}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>8.40%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"MAXIMO PTE (Tencent)"}'>MAXIMO PTE (Tencent)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0629}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>6.29%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BlackRock"}'>BlackRock</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.051652177348374975}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>5.17%</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX FIND"}'>Source: KRX FIND</td></tr>
</tbody>
</table><p>Most of K Cube Holdings' seven employees (as of April of this year) are the family members of Chairman Kim. Chairman Kim's younger brother, Kim Hwa-young, served as the CEO until the end of last year. Chairman Kim and his wife (Hyoung Mi-sun) are part-time directors. Chairman Kim's son Kim Sang-bin and his daughter Kim Ye-bin also serve at the company.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/621/original/1.jpeg?1631585050" class="editor-image img-responsive" data-smartkarma-image-id="229621"></figure><h2>Second: Violation of the Separation of Industrial &amp; Financial Capital</h2>
<p>The second is actually more fatal. The FTC is also investigating allegations that Kakao violated the 'Regulation on Separation of Industrial and Financial Capital'.</p>
<div class="content-highlight"><p><strong>K Cube Holdings changed its business registration type this year from management consulting to financial investment. As a result, K Cube Holdings, a financial company, came to govern the non-financial company, Kakao.</strong></p></div>
<p>The Fair Trade Act stipulates that financial companies belonging to a cross-ownership restricted business group cannot exercise their voting rights over non-financial companies in accordance with the principle of Separation of Industrial and Financial Capital.</p>
<p><strong>Violation of the Separation of Industrial and Financial Capital is way more serious than an unfair transfer of wealth and is subject to severe penalties.</strong></p></section>

There is a lot of confusion about exactly in which areas Kakao is under investigation by the Fair Trade Commission.The Fair Trade Commission is investigating K Cube Holdings from two angles.First: Non-disclosure of data on affiliatesThe FTC requires every business group whose total assets exceed ₩10T to submit data on all affiliates to designate a cross-ownership restricted business group every year. In particular, the FTC requires detailed shareholder status data for companies (wholly or partially) owned by the family members of the head of a business group.This purpose is clear. This is intended to regulate the exploitation of private interests by an owner family. That is, the FTC intends to prevent an unfair transfer of wealth.
However, the Fair Trade Commission argues that detailed data on K Cube Holdings, the de facto holding company of Kakao, have not been submitted for a long time.
The FTC is planning to intensively investigate whether K Cube Holdings has received profits from Kakao in an unfair way.
K Cube Holdings was established in January 2007 for the purpose of software development, and Kim Beom-soo (Kakao founder and chairman) owns 100% of the shares. K Cube Holdings currently owns a 10.59% stake in Kakao.





Kakao shareholding

Kim Beom-soo
13.29%



K Cube Holdings
10.57%

 

NPS
8.40%


MAXIMO PTE (Tencent)
6.29%


BlackRock
5.17%

Source: KRX FIND

Most of K Cube Holdings' seven employees (as of April of this year) are the family members of Chairman Kim. Chairman Kim's younger brother, Kim Hwa-young, served as the CEO until the end of last year. Chairman Kim and his wife (Hyoung Mi-sun) are part-time directors. Chairman Kim's son Kim Sang-bin and his daughter Kim Ye-bin also serve at the company.Second: Violation of the Separation of Industrial &amp; Financial Capital
The second is actually more fatal. The FTC is also investigating allegations that Kakao violated the 'Regulation on Separation of Industrial and Financial Capital'.
K Cube Holdings changed its business registration type this year from management consulting to financial investment. As a result, K Cube Holdings, a financial company, came to govern the non-financial company, Kakao.
The Fair Trade Act stipulates that financial companies belonging to a cross-ownership restricted business group cannot exercise their voting rights over non-financial companies in accordance with the principle of Separation of Industrial and Financial Capital.
Violation of the Separation of Industrial and Financial Capital is way more serious than an unfair transfer of wealth and is subject to severe penalties.

Kakao's De Facto Holding Company K Cube Holdings: Exactly What Are They Accused Of?

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

<div><p>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.</p></div><div><p>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.</p></div><div><p>Since spinning out from Kakao in 2017, 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. </p></div><div><p>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.</p></div><div>
<p>We have covered most aspects of the deal in our earlier notes, <a href="https://www.smartkarma.com/insights/kakao-pay-ipo-guided-by-ant-financial-to-be-a-mini-ant" target="_blank" rel="noopener">Kakao Pay IPO - Guided by Ant Financial to be a mini Ant </a>and  <a href="https://www.smartkarma.com/insights/kakao-pay-ipo-peer-comparison-local-and-international" target="_blank" rel="noopener">Kakao Pay IPO - Peer comparison - local and international</a>.</p>
<p>In this note we will talk about valuations and the latest announcement by the regulators.</p>
</div>

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.Since spinning out from Kakao in 2017, 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.
We have covered most aspects of the deal in our earlier notes, Kakao Pay IPO - Guided by Ant Financial to be a mini Ant and  Kakao Pay IPO - Peer comparison - local and international.
In this note we will talk about valuations and the latest announcement by the regulators.


Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement

<p>Kakao Bank's listing-day performance certainly exceeds expectations.</p><p>The opening price has risen by 38% compared to the offering price, and today's high was ₩68,000, and it currently settles at ₩63,100. This is a 60% increase from the offering price, and the market cap reaches ₩30T.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Bank today"}'>Kakao Bank today</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Price"}'>Price</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Market cap"}'>Market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"From the offering price"}'>From the offering price</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering price"}'>Offering price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":39000}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}'>₩39,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18.528909243}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩18.53T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Opening price"}'>Opening price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":53700}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}'>₩53,700</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":25.5128827269}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩25.51T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3769230769230769}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">37.69%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Daily high"}'>Daily high</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":68000}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}'>₩68,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":32.306816116}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩32.31T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7435897435897436}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">74.36%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Daily low"}'>Daily low</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":51000}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}'>₩51,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":24.230112087}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩24.23T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3076923076923077}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">30.77%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current"}'>Current</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":63100}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}'>₩63,100</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":29.9788249547}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula="=R[0]C[-1]*R1C5/1000000000000">₩29.98T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.617948717948718}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[-2]-R2C2)/R2C2">61.79%</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>As a result, Kakao Bank has easily surpassed its direct competitors, KB Financial and Shinhan Financial, in market capitalization and is currently ranked 12th in the KOSPI by market capitalization.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":2,"2":"KOSPI top 15"}'>KOSPI top 15</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":2,"2":"Market cap"}'>Market cap</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":1}'>1</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Samsung Electronics Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Samsung Electronics</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"005930"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="005930"'>005930</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":487.731234335}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩487.73T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":2}'>2</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"SK Hynix Inc"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>SK Hynix</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"000660"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="000660"'>000660</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":85.90427907}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩85.90T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":3}'>3</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Naver Corp"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Naver</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"035420"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="035420"'>035420</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":72.60442059}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩72.60T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":4}'>4</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Kakao Corp"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Kakao</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"035720"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="035720"'>035720</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":64.89119358}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩64.89T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":5}'>5</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Samsung Electronics Co Ltd Preference Shares Non Voting"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Samsung Electronics 1P</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"005935"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="005935"'>005935</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":61.55192516}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩61.55T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":6}'>6</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Samsung Biologics Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Samsung Biologics</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"207940"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="207940"'>207940</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":60.8718}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩60.87T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":7}'>7</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"LG Chem Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>LG Chem</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"051910"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="051910"'>051910</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":59.791714521}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩59.79T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":8}'>8</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Samsung SDI Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Samsung SDI</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"006400"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="006400"'>006400</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":53.36127528}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩53.36T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":9}'>9</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Hyundai Motor Co"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Hyundai Motor</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"005380"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="005380"'>005380</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":47.648005701}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩47.65T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":10}'>10</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Celltrion, Inc."}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Celltrion</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"068270"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="068270"'>068270</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":33.438886896}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩33.44T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":11}'>11</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Kia Corp"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Kia</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"000270"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="000270"'>000270</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":34.6991025032}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩34.70T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":12}'><strong>12</strong></td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Kakao Bank"}'><strong>Kakao Bank</strong></td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"323410"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="323410"'><strong>323410</strong></td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":29.9788249547}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula="=R[-15]C[-1]"><strong>₩29.98T</strong></td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":13}'>13</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"POSCO"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>POSCO</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"005490"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="005490"'>005490</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":29.9486778225}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩29.95T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":14}'>14</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"Samsung C&amp;T Corp"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Samsung C&amp;T</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"028260"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="028260"'>028260</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":26.911739664}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩26.91T</td>
</tr>
<tr>
<td style="width: 107.017px;" data-sheets-value='{"1":3,"3":15}'>15</td>
<td style="width: 296.08px;" data-sheets-value='{"1":2,"2":"HYUNDAI MOBIS CO., LTD."}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Hyundai Mobis</td>
<td style="width: 121.023px;" data-sheets-value='{"1":2,"2":"012330"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="012330"'>012330</td>
<td style="text-align: right; width: 184.091px;" data-sheets-value='{"1":3,"3":26.257687038}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00T","3":1}' data-sheets-formula='=googlefinance(R[0]C[-1], "price")*googlefinance(R[0]C[-1], "shares")/1000000000000'>₩26.26T</td>
</tr>
<tr><td colspan="4" rowspan="1" style="width: 708.21px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><h2><strong>Strong foreign buying this morning</strong></h2><div class="content-highlight"><ul>
<li><strong>Kakao Bank's share price fell below the opening price early this morning, raising some concerns. However, a strong buying from investors presumed to be foreign institutions came in rapidly through the foreign brokerage counter, mainly Credit Suisse.</strong></li>
<li><strong>As of 11:30 a.m., a purchase order of 6 million shares came in through the CS counter. This is 15% of the total purchase volume, which is an unusually large amount brokered by a foreign brokerage for local stocks any given day.</strong></li>
<li><strong>Therefore, the proportion of net buying by foreign investors is currently overwhelmingly high.</strong></li>
</ul></div>

Kakao Bank's listing-day performance certainly exceeds expectations.The opening price has risen by 38% compared to the offering price, and today's high was ₩68,000, and it currently settles at ₩63,100. This is a 60% increase from the offering price, and the market cap reaches ₩30T.








Kakao Bank today
Price
Market cap
From the offering price


Offering price
₩39,000
₩18.53T
-


Opening price
₩53,700
₩25.51T
37.69%


Daily high
₩68,000
₩32.31T
74.36%


Daily low
₩51,000
₩24.23T
30.77%


Current
₩63,100
₩29.98T
61.79%

Source: KRX

As a result, Kakao Bank has easily surpassed its direct competitors, KB Financial and Shinhan Financial, in market capitalization and is currently ranked 12th in the KOSPI by market capitalization.








KOSPI top 15
Name
Ticker
Market cap


1
Samsung Electronics
005930
₩487.73T


2
SK Hynix
000660
₩85.90T


3
Naver
035420
₩72.60T


4
Kakao
035720
₩64.89T


5
Samsung Electronics 1P
005935
₩61.55T


6
Samsung Biologics
207940
₩60.87T


7
LG Chem
051910
₩59.79T


8
Samsung SDI
006400
₩53.36T


9
Hyundai Motor
005380
₩47.65T


10
Celltrion
068270
₩33.44T


11
Kia
000270
₩34.70T


12
Kakao Bank
323410
₩29.98T


13
POSCO
005490
₩29.95T


14
Samsung C&amp;T
028260
₩26.91T


15
Hyundai Mobis
012330
₩26.26T

Source: KRX

Strong foreign buying this morning
Kakao Bank's share price fell below the opening price early this morning, raising some concerns. However, a strong buying from investors presumed to be foreign institutions came in rapidly through the foreign brokerage counter, mainly Credit Suisse.
As of 11:30 a.m., a purchase order of 6 million shares came in through the CS counter. This is 15% of the total purchase volume, which is an unusually large amount brokered by a foreign brokerage for local stocks any given day.
Therefore, the proportion of net buying by foreign investors is currently overwhelmingly high.


Kakao Bank, Apparently Passive Money Flowing in This Morning

AllocationAll the allocation results for the Kakao Bank IPO are now available at DART. Institutional investors took 55% of the total offering, and retail took 25.5%, receiving the forfeited shares from the ESOP subscriptions.
Almost all institutional allocations have gone to local publicly raised funds and pensions known for their long-term holding tendencies. Yes, as expected, those presumably long-term foreign funds also took a substantial portion, which Kakao Bank needs to boost the foreign ownership percentage, often interpreted as a symbolic indicator of popularity.









Allocation by type
Allocated, % of the offering
Final, % of the offering
Final, % of post-IPO SO


Institutional
55.00%
55.00%
7.58%


1. Local publicly raised funds
-
16.00%
2.21%


2. Local Br/IA
-
1.02%
0.14%


3. Local pension, etc.
-
9.83%
1.36%


4. Local others
-
0.61%
0.08%


5. Foreign
-
27.53%
3.80%


6. Foreign, other
-
0.00%
0.00%


Retail
25.00%
25.50%
3.51%


ESOP
20.00%
19.50%
2.68%


Total
100.00%
100.00%
13.78%

Source: DART



Below is the classification of institutional investors as defined in KRX statistics.






By investor type

1. Local publicly raised funds

Long-term


2. Local brokerages/investment advisories

Short-term


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
Long-term


4. Local others: discretionary investment companies, savings banks, real estate trust companies, capital companies, and leasing companies
Mainly, short-term


5. Foreign institutional investors with a transaction record: foreign IPO/hedge funds

Depends


6. Foreign institutional investors without transaction record: local hot money

Mostly, short-term

Source: DART




Lockups
Institutional allocations without lockup account for only 40%. Most of the shares allocated to local publicly raised funds and pensions are locked up for 3-6 months. Foreign funds also locked up about 25% of their allocated shares, which is much higher than usual.
The initial expectation was to take the lockup weight to a minimum considering the immediate float, but it turns out that Kakao Bank has aggressively locked up than originally expected.















Lockups by institution type
1. Local PO
2. Local Br/IA
3. Local pension, etc.
4. Local others
5. Foreign
6. Foreign, other
Total


6 months
13.02%
0.25%
14.84%
0.29%
8.42%
0.00%
36.81%


3 months
9.63%
0.62%
1.86%
0.29%
1.67%
0.00%
14.07%


1 month
4.13%
0.23%
0.59%
0.17%
3.61%
0.00%
8.72%


15 days
0.17%
0.04%
0.01%
0.00%
0.00%
0.00%
0.22%


No lockup
2.15%
0.71%
0.58%
0.37%
36.36%
0.00%
40.18%


Total
29.10%
1.85%
17.88%
1.12%
50.06%
0.00%
100.00%

Source: DART


The amount released to the market immediately after the listing is 22.55% of the total number of outstanding shares. This includes pre-IPO minority shareholders (mostly VC and corporate), which account for 15.99%.












Post-IPO lockup releases, as a % of SO
IPO shareholders
Major shareholder
ESOP
VC/corporate stakeholders
Other pre-IPO minority shareholders (mostly VC/corporate)
Total


1 year
0.00%
0.00%
2.68%
0.00%
0.00%
2.68%


6 months
2.79%
27.26%
0.00%
39.76%
0.00%
69.81%


3 months
1.07%
0.00%
0.00%
3.20%
0.00%
4.27%


1 month
0.66%
0.00%
0.00%
0.00%
0.00%
0.66%


15 days
0.02%
0.00%
0.00%
0.00%
0.00%
0.02%


Lock-up
4.54%
27.26%
2.68%
42.96%
0.00%
77.44%


No lock-up
6.56%
0.00%
0.00%
0.00%
15.99%
22.55%

Source: DART





Kakao Bank: Full Allocation Results, Index Floats, & Fast Entry Possibilities

As expected, Krafton's IPO price has been confirmed at ₩498,000, the upper end of the indicative price band. So, Krafton gets to raise a total of ₩4.3T through this public offering, and its market cap reaches ₩24.4T.







Pricing
Low
High (final)


Price
₩400,000
₩498,000


Base deal size
₩3,461.7B
₩4,309.8B


- Institutional allotment
₩1,903.9B
₩2,370.4B


Implied market cap
₩19,559.2B
₩24,351.2B


- Discount
30.93%
14.01%

Source: DART

The competitive rate for institutional subscriptions came out to be 243.2 to 1, similar to what has already been leaked from the market. Compared to the recent mega IPOs that easily exceeded 1,000 to 1, it can be seen that this IPO's institutional participation rate was low. However, considering that this IPO has a substantially larger offering size and a very aggressive price, it can be concluded that the interest of institutions was higher than expected.









By investor type
Institution
%
Demand
%


Local publicly raised funds
231
37.20%
445,792,000
38.52%


Local brokerages/investment advisories
18
2.90%
28,393,000
2.45%


Local pensions, funds managing proprietary assets, banks, and insurance companies
94
15.14%
242,965,000
20.99%


Local others (mostly discretionary investment companies - local hedge funds)
104
16.75%
234,982,000
20.30%


Foreign (foreign IPO funds &amp; hedge funds)
146
23.51%
62,498,497
5.40%


Foreign others (mostly local hot money)
28
4.51%
142,697,000
12.33%


Total
621
100.00%
1,157,327,497
100.00%


Subscription rate
243.15 to 1

Source: DART

Looking at the application results for each type of institution below, we can find a very interesting fact.
First, a large number of foreign institutions with business relationships (i.e., major foreign investment institutions) participated in this subscription. The share of 23.5% by the number of participating institutions is significantly higher than the typical level for local IPOs. Of course, most of them applied based on actual demand, so their proportion of total subscription volume is only 5.4%. However, considering that all these quantities are actual demand, we can safely say that their participation level is quite high. This is a result consistent with what Mirase Asset (the bookrunner) has continuously leaked to the market about the active participation of many major overseas institutions.

Another point to note is that the number of participating local institutions is remarkably low, consistent with the initial forecast that most small and medium-sized institutions skipped this IPO due to scheduling conflicts with LG Energy Solutions.
Finally, institutions belonging to the category 'Foreign others' were quite aggressive in taking orders despite a small number of participating institutions. These are mainly local hot money managers, who are the most active in early profit realization trading. In other words, their aggressive move to secure Krafton IPO shares means that they are heavily betting on a short-term price increase due to the entry of local retailers immediately after Krafton's listing.

The category 'Foreign' indicates foreign institutional investors with transaction records. They are foreign institutional investors who have a business relationship with the underwriter or of whom the underwriter acquirer is aware of the identity. So, these foreign institutions can be considered well-established overseas institutions actually based overseas.
In contrast, the category 'Foreign others' indicates foreign institutional investors without transaction records. Most of them are local hot money only whose legal office is registered overseas.
The "Unspecified" category usually indicates that they want the shares above the high end. With that in mind, 37.4% have gone for the upper end or above. The other 57.5% selected 75-100% of the upper end. So, most of the orders (95%) are priced at 75-100% of the upper end or higher. Unlike the initial concerns, we can say the institutional pricing is quite aggressive.









By price
Institution
%
Demand
%


Above high end
59
9.50%
279,666,000
24.16%


75-100% of high end
246
39.61%
665,029,823
57.46%


50-75% of high end
1
0.16%
1,000
0.00%


25-50% of high end
0
0.00%
0
0.00%


0-25% of high end
7
1.13%
11,370,000
0.98%


Median
0
0.00%
0
0.00%


75-100% of median
1
0.16%
1,000
0.00%


50-75% of median
0
0.00%
0
0.00%


25-50% of median
3
0.48%
77,000
0.01%


0-25% of median
105
16.91%
48,077,000
4.15%


Low end or below
27
4.35%
37,000
0.00%


Unspecified
172
27.70%
153,068,674
13.23%


Total
621
100.00%
1,157,327,497
100.00%

Source: DART



Krafton Bookbuilding: Subscription/Lockup Data & Resulting Implications

South Korea

Kakao Entertainment Corp. operates as an application software development company. The Company provides online cartoons, online novels, music, and more. Kakao Entertainment conducts businesses in South Korea.

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Kakao Entertainment (103260 KS)

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