Korea’s Largest Payments App More Than Doubles in Debut

(Bloomberg) -- Kakao Pay Corp., South Korea’s largest mobile payments app, more than doubled in its debut in Seoul, following a rocky path to public markets that was marked by heightened regulatory scrutiny.  

Shares of Kakao Pay surged more than 150% in early trading on Wednesday after pricing the offering at 90,000 won. The startup, backed by Jack Ma’s Ant Group Co., raised 1.53 trillion won ($1.3 billion), giving the online payments service a market capitalization of more than 11.7 trillion won before the start of trading. 

The IPO is seen as a litmus test for investor sentiment in South Korea, where a regulatory crackdown on platform companies has hit tech stocks. The online payments startup had to postpone its listing by more than two months, after first lowering its targeted IPO size in August as authorities ordered a revision to its prospectus and, more than a month later, changing its filing again to abide by new regulations. 

Read more about the crackdown’s impact on Korean IPOs

Korea has already seen a record amount of IPO deals this year as companies rushed to list their shares and take advantage of high valuations. But the enthusiasm has cooled after authorities beefed up scrutiny of new listings and retail investors are no longer betting on first-day pops. PUBG maker Krafton Inc.’s shares fell as much as 20% on their first day of trading, while K Car Co. dropped 8% on its debut. 

Fueled by online activities during the pandemic, Kakao Pay’s sales more than doubled to 284 billion won last year, helping to narrow net losses by 61% to 25 billion won. Operating profit in the first half of 2021 was 2.6 billion won. 

The mobile payments service with 36 million users is seeking to expand its fintech platform, with plans to add a mobile securities trading service and an insurance service on its app early next year, Chief Executive Officer Alex Ryu said during an online briefing last week. The company is also planning to enter China, Southeast Asia and Europe and grow its overseas business to a “meaningful level” within five years.

Kakao Pay is the latest in a line of Kakao Corp. units to go public. Banking affiliate KakaoBank Corp., which raised $2.2 billion in its own listing, has dropped nearly a third from its record high after the regulatory crackdown, though the shares are still up more than 56% from its IPO price.

“The successful IPO of Kakao Pay could enhance the convenience of Kakao Corp.’s ecosystem,” said Bloomberg Intelligence analyst Rena Kwok. “This may bode well for KakaoBank, as the neobank seems well-placed to ride on a rising trend of online banking transactions through 2025.”

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