[Edaily Reporter Lee So-Hyun ] Is listing a subsidiary on the stock market to recoup investment funds from financial investors (FIs) also beneficial to the parent company’s general shareholders? As Kakao puts the brakes on Kakao Mobility’s plan to list American Depositary Receipts (ADRs) in the U.S., the relationship between subsidiary listings and “shareholder value” is once again drawing attention.

Kakao(035720)The issue Kakao raised is not the U.S. listing itself, but the structure that only makes the stake held by TPG, the second-largest shareholder, tradable. While TPG can recoup its investment, Kakao Mobility will not receive any new capital. On the other hand, the company still faces an enterprise value discount due to the dual listing and liability under U.S. securities laws.

TPG Exit Put on Hold… Kakao Cites “Tangible Benefits for General Shareholders”

According to industry sources on the 23rd,

Kakao

’s board of directors opposed the Kakao Mobility ADR listing proposal—based on TPG’s stake—the previous day.

The Kakao Mobility Shareholder Value Enhancement Committee, in which TPG holds a majority stake, reviewed the ADR as one of the options for recouping financial investor (FI) funds and confidentially filed Form F-1 with the U.S. Securities and Exchange Commission (SEC) on July 2.

There were also differing opinions within Kakao Mobility itself. CEO Ryu Geung-seon had supported the SEC registration and listing application last May but cast a dissenting vote on the method of consulting with the parent company regarding shareholder return policies, regulations on dual listings, and the listing schedule. He subsequently stepped down from the committee on June 24, and the committee was reorganized to consist of two members from TPG and one from Kakao.

Kakao cited several reasons for its opposition, including the fact that benefits would be concentrated among specific financial investors (FIs) while it would be difficult for these benefits to translate into economic gains for general shareholders. It was also reported that Kakao considered factors such as the dispersion of investment demand between Kakao and Kakao Mobility, the potential for a net asset value (NAV) discount due to dual listing, conflicts of interest among shareholders of both companies, and liability under U.S. securities laws.

An industry insider stated, “Amid ongoing concerns about shareholder value following the spin-off, emphasizing ‘economic benefits for general shareholders’ can be interpreted as a message intended to remind the market of the company’s commitment to protecting shareholders.” However, a Kakao spokesperson drew a clear line, stating, “There is no direct connection between the spin-off and this decision.”

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S. Listing: Will There Be Fundraising or Not?

The key question is what benefits the company and its existing shareholders will gain from the listing. Even if the company must bear the disclosure requirements and legal liabilities of the U.S. stock market, the significance of the listing could change if there are benefits such as raising new capital or expanding the base of global investors.

Last July, SK hynix raised approximately $26.5 billion (about 40 trillion won) directly by listing additional ADRs based on its own new shares. By issuing new shares to secure funds, the company obtained the resources needed for growth investments, such as production facilities and research and development.

In contrast, Kakao Mobility—an unlisted subsidiary of Kakao—operates under a structure that liquidates only TPG’s existing shares, rather than new shares issued by the company itself; consequently, no new funds flow into Kakao Mobility. In essence, the funds secured through the listing are not invested in the company’s growth but are instead used to facilitate the financial investors’ (FIs) return on investment.

The legal burdens associated with a U.S. listing are also a variable. Webtoon Entertainment, a subsidiary of Naver, became embroiled in a class-action lawsuit related to its initial public offering (IPO) registration statement following its 2024 Nasdaq listing, with the company, its board of directors, and the underwriters named as defendants. Although a tentative settlement was reached in July of this year, a separate shareholder derivative suit targeting the board of directors has been filed.

Choi Jun-seon, Professor Emeritus at the Sungkyunkwan University Law School, explained, “It can be seen that the directors reflected in their resolution the assessment that ‘is it really in the shareholders’ best interest to face increased liability without much tangible benefit?’” He added, “This is the result of weighing the burdens under U.S. securities laws against the benefits to shareholders.”

From “the Company” to “the Company and Shareholders”… The Board’s Changing Calculations

Changes in the regulatory framework are also influencing this judgment. The amended Commercial Act expands the scope of directors’ fiduciary duties to include not only the company but also shareholders, and explicitly mandates the fair treatment of all shareholders. Regulations regarding dual listings have also been strengthened to require the parent company’s board of directors to review the impact of a subsidiary’s listing on shareholders and consider protective measures.

Consequently, the criteria used by boards of directors when evaluating a subsidiary’s IPO are also changing. Rather than focusing solely on the capital recovery of the subsidiary and financial investors (FIs), as in the past, the structure now requires a comprehensive assessment that includes the tangible benefits to the parent company’s common shareholders, the potential for a discount in corporate value, conflicts of interest, and legal liability.

There are similar cases. When LG Corp. went public (IPO) in 2025, the sale of existing shares by Macquarie PE accounted for half of the public offering, but the company simultaneously raised growth capital through a new share issuance. Whether a subsidiary’s IPO merely serves as an exit for financial investors or leads to funding for the company’s growth has thus become a key factor in assessing shareholder value.

Kakao’s recent decision can be seen as an example illustrating that the board’s criteria for evaluating a subsidiary’s IPO are expanding beyond mere fundraising or an FI’s ability to recoup its investment to include the economic benefits accruing to the parent company’s common shareholders.

Professor Choi stated, “Going forward, FIs will demand clear guarantee clauses regarding what to do if the IPO does not proceed as planned,” adding, “It is highly likely that contractual safeguards, such as liquidated damages, will be strengthened.”

Changes are also expected in the contracts between companies and FIs regarding subsidiary IPOs. While FIs need to secure a path for recovering their investments, the boards of directors of both the parent company and the subsidiary now face a greater need to explain how the structure affects the interests of all shareholders.

It is difficult to determine whether a subsidiary’s IPO enhances shareholder value based solely on “whether or not it goes public.” Other factors are emerging as key considerations: who is selling the shares, whether new capital is flowing into the company, what changes occur in corporate value and shareholder structure after the IPO, and who bears the legal and financial burdens arising from the process.