January 30, 2014 1:00 pm JST

Kakao aims to go public in South Korea by May 2015

KOICHI KATO, Nikkei staff writer

SEOUL -- The South Korean company behind the popular smartphone call and chat app KakaoTalk plans to go public next year, according to Lee Sirgoo, the company's co-CEO.

     Kakao aims to make an initial public offering in May 2015, Lee said.

     The company is expected to list its shares on the Kosdaq market for start-ups on the Korea Exchange in South Korea. Morgan Stanley, the U.S. financial services company, is informally in charge of managing the IPO and plans to submit the necessary application to the exchange.

     The IPO could raise more than 1 trillion won ($945 million), which Kakao is expected to use to upgrade its servers and grow its marketing efforts. Details about the fundraising plan have yet to be announced. The projection by analysts is that Kakao's market capitalization with the addition of the IPO would be around 5 trillion won.

Catching up fast 

Kakao is facing ever-growing competition from abroad, most notably from Japan's Line. Kakao has been investing more in Indonesia, Vietnam and other Southeast Asian nations, considering them essential to its growth strategy. The company has assigned about 10 officials from South Korea to the region and is adding more local employees in those areas. 

     In the business year ended in December 2012, Kakao posted 46.1 billion won in group sales, up 25-fold from the previous year. Its operating profit over the year was 7 billion won. In 2011, it posted an operating loss of 12.7 billion won. Statistics for 2013 have not been released, but it is estimated that Kakao had sales of 200 billion won.

     Much of Kakao's increased revenue has come from fees paid for online games that are part of the chat app.

     The company began the KakaoTalk service in March 2010. It currently has more than 130 million subscribers worldwide. Although the number of subscribers is growing, Kakao lags behind Line, which has over 300 million subscribers, and China's WeChat, which has 600 million.

     Naver, the South Korean parent company of Line, opened its first dedicated center in the city of Chuncheon last summer to manage photos and other data for Line. The company expects the number of Line users to eventually reach 1 billion, and it is planning accordingly.

     There are reports that Line might go public this year.

     Kakao, being an independent venture, is believed to be at a disadvantage financially compared with Line and other rivals that can more readily pool resources to build up operations and pull in overseas subscribers. Its listing could dramatically change that.