Kakao spin-off plan faces lingering investor distrust

Kakao’s ambitious plan to split its business into two entities handling its mobile messenger and investment businesses, respectively, is facing lingering investor distrust, with its stock price falling more than 7 percent to wipe out 1.8 trillion won ($1.3 billion) of market cap following the announcement on Friday. The mobile platform giant stressed that the restructuring will take the form of a spin-off, in which shares of the newly created company will be distributed to existing shareholders in proportion to their current stakes, so the measure is aimed at safeguarding shareholder value. However, investors remain skeptical over whether spreading Kakao’s businesses across multiple companies would help enhance corporate value, particularly when its existing artificial intelligence (AI) businesses have yet to generate earnings meeting market expectations. During a board meeting Friday, the company approved the spin-off plan to split Kakao into KakaoAI and KakaoX. Kakao plans to complete the spinoff by Jan. 1 next year, and relist KakaoAI on Jan. 27. KakaoAI will be a newly created en