Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 25 years of experience in analyzing hundreds of companies, especially in Asia. Deep expertise in the following sectors:
- Technology (E-commerce, SaaS, Internet)
- Consumer 
- Special Situations/Deep Value Plays
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Concerns Are Growing that Kakao Becomes a Political Scapegoat Ahead of the Presidential Election

Kakao Pay - One Third of Revenues in Jeopardy or Reach a Compromise with the Regulators?

Upstart Holdings - Up 1,252% from the IPO Price & A Key Comp for Kakao Pay

FSC's Sudden Action on Local Financial Platforms: A Fatal Blow to Kakao Pay's IPO Valuation

Initial Thoughts on the Kakao Mobility IPO

Kakao Pay - Updated Valuation With Revised IPO Price Range

The Blockchain Delusion. A (Mostly) Bearish Investment Thesis.

Gravity Works As WeWork Doesn't; Now Plan B

Event-Driven

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<div>There have been a lot of concerns in the past year about the two Internet giants in Korea - Naver and Kakao becoming too powerful and dominant in Korea. Most of the discussions have been just talk without concrete actions. However, this is about to change materially as several senior members of the Korean government have provided strong indications that greater levels of restrictions could be placed on these two Internet giants and their affiliates in terms of their business operations.</div>
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<div>The Korean government which is trying to crack down on the two key Internet giants in Korea is similar to how the Chinese government is trying to crack down on the Internet giants in China. <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> shares declined by 7.9% and 10.1%, respectively today following concerns about greater amount of regulatory restrictions on the company and its affiliates' operations. </div>
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<div>All in all, investors generally despise excessive uncertainty and higher potential for government meddling. These have been key factors that have driven the share prices of the major Chinese Internet tech stocks lower in the past several months.</div>
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<li>Although it remains to be seen how much the Korean government will try to crack down on the Korean Internet giants, the timing of their meddling over the next 3-6 months as we draw closer to the Presidential election in March 2022 is likely to become GREATER, not LESS.</li>
<li>Consequently, we believe that investors should take into consideration the potential for greater government regulations surrounding major business operations of Kakao and Naver and their affiliates in the next 3-6 months, especially on the financial sector.</li>
<li>The higher likelihood is for greater clarity in what they can or cannot do could become more specific after the Presidential election in March 2022. </li>
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There have been a lot of concerns in the past year about the two Internet giants in Korea - Naver and Kakao becoming too powerful and dominant in Korea. Most of the discussions have been just talk without concrete actions. However, this is about to change materially as several senior members of the Korean government have provided strong indications that greater levels of restrictions could be placed on these two Internet giants and their affiliates in terms of their business operations.

The Korean government which is trying to crack down on the two key Internet giants in Korea is similar to how the Chinese government is trying to crack down on the Internet giants in China. Naver Corp (035420 KS) and Kakao Corp (035720 KS) shares declined by 7.9% and 10.1%, respectively today following concerns about greater amount of regulatory restrictions on the company and its affiliates' operations. 





All in all, investors generally despise excessive uncertainty and higher potential for government meddling. These have been key factors that have driven the share prices of the major Chinese Internet tech stocks lower in the past several months.


Although it remains to be seen how much the Korean government will try to crack down on the Korean Internet giants, the timing of their meddling over the next 3-6 months as we draw closer to the Presidential election in March 2022 is likely to become GREATER, not LESS.
Consequently, we believe that investors should take into consideration the potential for greater government regulations surrounding major business operations of Kakao and Naver and their affiliates in the next 3-6 months, especially on the financial sector.
The higher likelihood is for greater clarity in what they can or cannot do could become more specific after the Presidential election in March 2022. 





The Korean Government Could Follow the Chinese Government in Cracking Down on the Internet Giants