Kakao Enterprise seeks $224 mn capital raise

Kakao Enterprise CI

Kakao Enterprise is planning a capital increase of up to 300 billion won ($224 million) to bolster its cloud business, sources in the investment banking industry said on Wednesday. The company is reportedly exploring interest from potential investors for this new issuance and is considering options including redeemable convertible preferred shares (RCPS) and convertible preferred shares (CPS).

Founded in 2019, Kakao Enterprise is a platform and solutions development company focused on artificial intelligence (AI). In response to financial struggles, the company underwent restructuring in 2023 and spun off its IT solutions division, including Kakao Work, earlier that year to realign its focus on the cloud business.

However, Kakao Enterprise has continued to face persistent losses. The company recorded operating losses of 36.8 billion won in 2020, 90.1 billion won in 2021, 140.5 billion won in 2022, and 127.3 billion won in 2023, with the cumulative operating loss over the past four years totaling 394.7 billion won.

Kakao Enterprise received a 100 billion won investment from Korea Development Bank (KDB) in 2021 and borrowed an additional 100 billion won from its parent company, Kakao, in July 2022. The company’s financial condition continued to worsen despite these efforts, with total equity standing at a negative 88.4 billion won by the end of 2023.With this capital increase, Kakao Enterprise aims to shore up its finances and accelerate the expansion of its cloud business.