Ant Group-Backed Kakao Pay Seeks Up to $1.4 Billion in IPO

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Kakao Pay Corp., South Korea’s largest online payment service with 36 million users, is seeking to raise as much as 1.63 trillion won ($1.4 billion) in an initial public offering in Seoul, following blockbuster IPO filings from Kakao Bank and Krafton Inc. this week.

The Pangyo-based fintech company will sell 17 million new shares at 63,000 won to 96,000 won apiece, Kakao Pay said in a filing on Friday. At the top of the range, its market capitalization could exceed $11 billion. The firm is scheduled to debut on August 12.

Backed by Ant Group Co., the fintech platform is the latest South Korea firm to tap capital markets in the wake of Coupang Inc.’s record-breaking $4.6 billion New York IPO in March. Among the companies that could make 2021 a record year for Korean floats are Krafton, the company behind hit mobile game PlayerUnknown’s Battlegrounds that’s planning to raise $3.8 billion and Kakao Bank, which is seeking as much as $2.3 billion. Kakao Mobility and Kakao Entertainment -- affiliates of Kakao Pay’s parent Kakao Corp. -- are also considering listings next year.

Ant Group-Backed Kakao Pay Seeks Up to $1.4 Billion in IPO

“The Covid-19 has fueled transitions to online financial service,” Alex Ryu, chief executive officer of Kakao Pay, said in an interview in May. “We were originally targeting the IPO in 2022 or 2023 but the plan has been brought forward because of the steep growth.”

The main underwriters for the IPO are Samsung Securities Co., JPMorgan Chase & Co. as well as Goldman Sachs Group Inc. The banks had valued the firm by comparing against PayPal Holdings Inc., Square Inc. and Brazil’s Pagseguro Digital Ltd.

Kakao Pay’s revenue more than doubled to 284 billion won last year, while it cut net losses by 61% to 25 billion won. In the first quarter, it recorded its first-ever quarterly operating profit of 10.8 billion won. Helped by easy access to the country’s largest messaging service, the company has amassed millions of monthly active users and is now seeking to expand its portfolios from money transfer and payment services to securities trading and insurance.

Ryu, 44, said the company’s currently developing a mobile trading service, which it aims to offer on Kakao’s messenger and payment apps in the second half of this year. Kakao Pay already offers some investment products such as funds, after it acquired a local brokerage firm in February 2020.

It will directly compete against cross-town rival Viva Republica Inc.’s Toss, which recently launched a securities trading service that’s drawn new users in their 20s and 30s. That’s prompted traditional brokerage firms such as Kiwoom Securities Co. and Samsung Securities to rush to offer simplified mobile trading platforms to compete against fintech startups that are disrupting the market.

The mobile payment company also aims to get a final approval this year for setting up an insurance service. It intends to target a niche market with cheaper and shorter-term products designed for daily activities such as a one-day hiking trip or mobile phone damages.

Ant Group-Backed Kakao Pay Seeks Up to $1.4 Billion in IPO

Kakao Pay was spun off from Kakao Corp. in April 2017, months after it signed a strategic partnership with Ant -- which invested $200 million in the payment affiliate. Kakao Corp. holds 55% in the unit, while Ant has a 45% stake through Alipay Singapore Holding as of May, the company said. Kakao Pay and Alipay have a partnership to allow cross-use of their payment services, though the expansion stagnated during the pandemic as people halted overseas trips, Ryu said.

With the money raised from the IPO, the Korean payment service will invest in expanding the number of offline franchises that accept Kakao’s payment services. Out of 2.5 million offline stores in South Korea, Kakao’s payment service is currently available in 600,000 and it plans to expand the number of stores to as many as 1.5 million, Ryu said. Kakao Pay will also spend money for new businesses and acquisitions to help accelerate its growth, he said.

“We’d like to solidify our business basis for the next 2 to 3 years,” Ryu said. “We’re at the starting line.”

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