Block deal leads KakaoBank's stock price to drop

Block deal leads KakaoBank's stock price to drop

An employee walks into the headquarters of KakaoBank in Pangyo, Gyeonggi Province on August 5. Yonhap

By Anna J. Park

KakaoBank’s stock price tumbled almost eight percent on Thursday, finishing at 81,900 won ($70.53), due to a massive block deal ― or the sale of a large number of securities ― worth over one trillion won.

Korea Post, which previously owned a 3.2-percent stake, or 15.2 million shares, in the internet-only bank, sold 2.9 percent of its shares, or 13.6 million shares, on Wednesday afternoon after the market closed, to lessen the impact on the stock price.

Still, the block deal news caused the stock price to take a nosedive on Thursday. KakaoBank started trading at 81,000 won, down 8.7 percent, on Thursday, but rose to 83,300 around 11 a.m., only to close at 81,900 won.

Korea Post’s 2.9-percent stake ― or 13.6 million shares ― in KakaoBank was sold at around 80,000 won per stock, discounted by around 9 percent from the market price through the block deal, garnering 1.09 trillion won in cash. With the block sale, Korea Post now owns 1.55 million shares in the bank. Citigroup Global Market Securities Korea managed the block deal sale.

As institutional investors can purchase shares through a block deal at a much lower price than the market price, block deals are expected to exert negative pressure on the current stock price.

With the price fall, KakaoBank’s market cap stood at 39.5 trillion won at Thursday’s closing. Its market cap ranking has also been lowered to eleventh place among the main benchmark KOSPI-listed companies, trailing behind Hyundai Motor Group and Celltrion, which took the ninth and tenth positions in the ranking of the companies with the largest market cap. Kakaobank previously held the ranking of eighth place following its IPO last month.

Market experts also showed a more cautious approach about the bank’s future price moves. Goldman Sachs offered a neutral position on the internet-only bank, saying that although the bank is expected to witness a 74-percent average annual growth rate until 2025, the current valuation already reflects this optimistic outlook.

SK Securities and Kyobo Securities set their target prices at 64,000 won and 45,000 won, respectively, much lower than the current market price. While they view the internet-only bank as a financial institution with limited growth potential, those who propose a much higher target price view the company as a major tech platform with huge growth possibilities.

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