Kakao to suspend trading due to 5-for-1 stock split next week

A monument at Kakao’s headquarters in Jeju (Kakao)

Trading in shares of Kakao, South Korea’s top mobile messenger operator, is set to be suspended for three days from Monday, following its decision to carry out its first-ever stock split.

By lowering the face value of its stocks by 80 percent, the split makes it easier for small investors to purchase shares. It will increase the number of issued shares to 443,523,100 from 88,704,620 shares -- each shareholder will get five new shares for each one they currently hold. The newly split shares will be tradable from Thursday.

On the last day of trading before the trading suspension, Kakao’s stocks rose 1.82 percent to 558,000 won ($498.30), from the previous session’s close, at Friday’s closing bell, while the share price marked a fresh 52-week high of 561,000 won during intraday trading a day earlier.

Since the stock split announcement on Feb. 25, the mobile messenger operator’s stocks have risen over 15 percent. Compared to the beginning of the year, the price has surged nearly 41 percent.

According to the Korea Exchange’s KIND regulatory filing system, 10 listed firms conducted stock splits from the end of last year. Within three months of dividing face-values, the companies’ shares gained 16.1 percent on average, but only four firms benefited from the splits, the data showed.

Market watchers also say that the stock split is unlikely to affect the value of shareholdings, adding it is not a variable to the company’s business performance. But expectation on more active stock trading after the split is a positive factor to the share price, they say.

Its mobile business unit Kakao Mobility’s cooperation with Google and the rising value of the mobile messenger giant’s 23.1 percent stake in Dunamu are also likely to boost the shares, they say.

Samsung Securities raised its target price of Kakao to 680,000 won from the previously suggested 600,000 won. The brokerage’s analyst Oh Dong-hwan wrote in a report that “The value of Kakao’s stake has to be reevaluated after Dunamu’s anticipated market debut.”

Daishin Securities’ analyst Lee Min-a also pointed to Kakao affiliated firms’ new business growth, along with some of their upcoming initial public offerings. Upon the positive evaluation, the brokerage raised its target price of Kakao from 550,000 won to 600,000 won.

By Jie Ye-eun (yeeun@heraldcorp.com)

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