[Edaily Reporter Park Jung-Soo ] Kakao(035720)Kakao is splitting into “two Kakaos.” The plan is to separate a growth company focused on KakaoTalk and artificial intelligence (AI) from an investment company managing affiliates in finance, content, and mobility, allowing each to pursue its own path. While this is a strategic move aimed at simplifying the complex business structure and accelerating the pace of AI competition, the market’s initial reaction was lukewarm. On the day the split was announced, the stock price plummeted, and labor unions also voiced opposition, citing uncertainty regarding employment.
The securities industry, while agreeing with the intent behind the spin-off, is leaning more toward caution than optimism. While there is potential for Kakao to be revalued as a growth stock once KakaoTalk and the AI business become independent, the “holding company discount” could become even more pronounced for KakaoX, which will retain only stakes in its affiliates. Ultimately, the success of this split depends not on the division into two companies per se, but on whether Kakao AI can demonstrate actual AI growth potential and whether KakaoX can convert its held assets into shareholder value.

◇ “Seize the AI Golden Opportunity”… Why Kakao Is Splitting into Two
According to the Financial Supervisory Service’s electronic disclosure system on the 29th, Kakao held a board meeting on the 21st and decided to split the company via a spin-off into the surviving entity “Kakao X” and the newly established entity “Kakao AI.” The split ratio, based on the book value of net assets, is 0.6351463 for Kakao X and 0.3648537 for Kakao AI. Following an extraordinary general meeting of shareholders on December 17, the company will be split on January 1 of next year, with Kakao X undergoing a change of listing and Kakao AI a relisting on January 27.
Kakao AI will house the advertising, commerce, and AI businesses, centered around KakaoTalk and KakaoMap. Meanwhile, Kakao X will manage stakes in major affiliates—including KakaoBank Corp.(323410), kakaopay(377300), Kakao Mobility, and Kakao Entertainment—as well as the company’s investment functions. In effect, this clearly divides their roles: Kakao AI will serve as a growth company focused on internet platforms and AI, while Kakao X will manage affiliates and handle investments.
Behind Kakao’s decision to split the company into two lies a sense of urgency regarding speed. According to Kakao, 23 of the board’s major decisions over the past five years—approximately 85%—involved subsidiary-related matters. Even among the 32 internal investment reviews conducted over the past year, subsidiary-related items accounted for 84%. The company concluded that because management resources were concentrated on supporting subsidiaries and restructuring, it was unable to devote sufficient effort to its core KakaoTalk and AI businesses.
Kim Do-young, CEO-designate of Kakao X, emphasized the need to accelerate the AI business at the time of the spin-off announcement, stating, “There was a sense of urgency that we couldn’t afford to miss this moment.” Jeong Shin-ah, CEO-designate of Kakao AI, also explained that separating the subsidiary management functions has created a structure that allows the company to focus on its core businesses.
There is also an intention to shake off the “conglomerate discount” that has long dogged Kakao. The argument is that because businesses of different natures—such as AI platforms, finance, content, and mobility—were bundled within a single company, the value of individual businesses was not properly recognized. The company expects that separating decision-making and capital allocation by business unit will make the value of each business clearer.
Its growth targets are also aggressive. Kakao AI has set goals of over 6 trillion won in total revenue, 1 trillion won in AI revenue, and an operating profit margin of over 30% by 2030. The company plans to increase daily active users (DAU) for its AI services to over 20 million and boost time spent on KakaoTalk by more than 50% compared to current levels. Kakao X has set a target of over 10 trillion won in revenue from its core businesses—focused on tech-fin, content, and mobility—by 2030.

◇ “You Can’t Split Responsibility Even If You Split the Company”… Unease Among Employees and Shareholders
The problem is that the market did not immediately view this decision as “value enhancement,” as the company had hoped.
On the 21st, the day of the announcement, Kakao closed at 35,800 won, down 7.49% from the previous trading day. During the session, the stock fell as low as 33,600 won. Selling pressure was so intense that the decline briefly widened to the 13% range. Analysts attribute this to investor sentiment being weighed down by past experiences with “splitting-up IPOs”—a controversy that arose from the successive listings of Kakao Games Corp., KakaoBank Corp., and kakaopay.
This time, the structure differs from an asset spin-off. This is because it is a stock spin-off, in which existing Kakao shareholders receive shares of both Kakao X and Kakao AI in proportion to their current ownership stakes. The issue of dilution in existing shareholders’ equity value—which typically occurs when a subsidiary is newly listed following an asset spin-off—is relatively minor. SamsungSecurities also assessed that, since the stock spin-off method was chosen, the risk of core businesses being separated from the parent company or existing shareholders’ economic stakes being diluted during the process of attracting external investment has been reduced.
Nevertheless, investor anxiety did not subside easily. Kakao’s stock price fell from 38,700 won on the 20th—just before the split was announced—to 35,800 won on the 21st. It subsequently recovered to 36,850 won on the 28th. While this represents a 2.9% increase from the closing price on the day of the announcement, it remains about 4.8% lower than the stock price immediately prior to the split.
Employee backlash has also been intense. Immediately following the spin-off announcement, the Kakao branch of the National Chemical, Textile, and Food Industry Labor Union voiced its opposition, stating, “Even if the company splits, it cannot split its responsibilities.” They argue that the company must go beyond simply promising employment continuity and provide concrete details on how it will protect employees’ jobs and working conditions during post-spin-off restructuring, as well as in the processes of divestitures, mergers, spin-offs, and business transfers.
In particular, the union pointed out that during the spin-off process, the majority of employees were not provided with sufficient information regarding their future affiliations, duties, or employment, nor were there any prior consultations. While the company attributes the erosion of corporate value to its complex business structure, the union argues that an assessment of repeated decision-making failures and management accountability must take precedence.

◇ Target Prices Lowered Across the Board… “Holding Company Discount Takes Precedence Over AI Premium”
Reactions from the securities industry have also turned more conservative than before. Major securities firms that issued reports immediately after the spin-off have successively lowered their target prices for Kakao.
KIWOOM Securities lowered its target price from 110,000 won to 70,000 won, while Hana Securities adjusted its target from 58,000 won to 50,000 won. SamsungSecurities cut its target by 18.4%, from 49,000 won to 40,000 won, and downgraded its investment rating from “Buy” to “Hold.”
Meritz Securities lowered its fair value estimate from 52,000 won to 37,000 won and downgraded its investment rating from “Buy” to “Hold.” The firm cited the increased likelihood that a net asset value (NAV) discount will be applied to Kakao X following the spin-off, as well as the fact that the company’s AI monetization strategy has yet to demonstrate tangible results.
Daol Investment & Securities also lowered its target price from 60,000 won to 45,000 won. The firm determined that a new valuation method must be applied since the structure—which allowed Kakao to simultaneously hold its subsidiaries and AI business, a key investment attraction—will be disrupted. However, it maintained its assessment that Kakao AI, which has higher growth potential than Kakao X, remains relatively more attractive as an investment.
The biggest concern among securities analysts is Kakao X. Until now, Kakao has faced a discount on the value of its subsidiaries, but this was largely offset by its high-margin platform businesses such as KakaoTalk, advertising, and commerce. After the spin-off, Kakao X will take on the character of a pure investment company holding stakes in affiliates, making it more likely to face a higher holding company discount than before. If additional subsidiaries, such as Kakao Mobility, are listed, the dual-listing discount could also come back into focus.
Conversely, there is an opportunity for Kakao AI. Since it combines the cash-generating businesses of KakaoTalk, advertising, and e-commerce with the growth potential of AI into a single company, it is likely to be revalued as an AI company. KIWOOM Securities estimated Kakao AI’s allocated market capitalization at approximately 5.8 trillion won based on the split ratio, but calculated its fair value at around 17.5 trillion won, assessing Kakao AI as having higher investment appeal than Kakao X (allocated market capitalization of approximately 10 trillion won, fair value of approximately 13.5 trillion won).
However, there are also significant concerns that simply adding “AI” to the name does not automatically guarantee a premium. SamsungSecurities believes that the reason for Kakao’s current undervaluation lies not simply in corporate governance issues, but also in the market’s low confidence in the competitiveness and monetization potential of its AI services. The analysis suggests that a high valuation multiple can only be applied once it is confirmed that Kakao’s stated AI targets—such as 20 million daily active users (DAU) and 1 trillion won in AI revenue—actually translate into advertising, commerce, and subscription revenue.
There are also concerns that synergies between business units could actually weaken. The core of the “agent-based AI” envisioned by Kakao is not limited to user searches and recommendations but extends to payments, transportation, and content consumption. However, if Kakao AI—which owns KakaoTalk—and Kakao X—which owns subsidiaries in finance, mobility, and content—are legally separated, additional coordination will be required regarding data sharing, API integration, and commission structures. SamsungSecurities pointed out that while the move may improve operational efficiency, it could weaken the integrated execution capabilities that bind the entire Kakao ecosystem together.
Strengthened shareholder returns are a positive factor. Kakao AI plans to return 20–35% of its adjusted free cash flow (FCF) to shareholders and expand the return rate to up to 40% as FCF grows in the future. Kakao X will also allocate 30% of after-tax dividends received from subsidiaries and 30% of capital gains toward shareholder returns. It has also announced plans to repurchase and cancel a total of 300 billion won worth of its own shares over the next three years, funded by gains from the sale of its Dunamu stake.
Experts unanimously agree that the key issue is not the “split” itself, but rather what happens “after the split.” Simplifying Kakao’s previously complex structure and granting existing shareholders shares in both companies is a positive development. On the other hand, while the holding company discount applied to Kakao X is a relatively predictable negative factor, the AI premium that Kakao AI is expected to receive is still largely based on expectations that must yet be proven by actual performance.
Oh Dong-hwan, an analyst at SamsungSecurities, stated, “Ultimately, the combined corporate value after the spin-off is expected to hinge on the battle between the extent of Kakao AI’s re-rating and the extent of Kakao X’s de-rating.” He added, “At this point, while the possibility of an expanded holding company discount for Kakao X is relatively clear, whether Kakao AI can secure an AI premium remains an uncertain variable dependent on future business performance.”