Kakao Split Targets AI, but IBK Cuts Price Target to 53,000 Won

Doubts Priced In Before the Split Announcement

Kakao’s spin-off is a business restructuring aimed at strengthening its artificial-intelligence capabilities, but the numbers immediately visible to investors are a falling share price and a reduced target. According to a report carried by Maeil Business Newspaper’s securities section on the 21st, IBK Securities cut Kakao’s target price by 20,000 won, from 73,000 won to 53,000 won, while maintaining its Buy rating. Kakao shares fell 6.14% after the spin-off announcement.

This gap suggests that the business direction and the timing of investment are viewed differently. Separating KakaoTalk and the AI business into two companies could make their value easier to assess, but during the early stages of the split, investors must verify whether the two companies’ roles and cash flows actually work in practice. Accordingly, what the market has priced in so far is closer to uncertainty over execution than to optimism about the restructuring.

Businesses and Timeline Split Between KakaoX and KakaoAI

On the 21st of last month, Kakao announced a spin-off dividing the company into KakaoX and KakaoAI. KakaoAI will handle the KakaoTalk-based platform business, while KakaoX will oversee the remaining operations, including tech finance, content, mobility and investments. The split date is scheduled for January 1, 2027, with the amended listing and relisting planned for January 27 of the same month.

IBK Securities assessed that KakaoTalk and the AI business have been undervalued because complex and inefficient operations are mixed together. Researcher Lee said, “We expect this split to eliminate the factors behind the undervaluation.” However, the Act Corporate Governance Research Institute pointed out that the reason for dividing a listed company is not clear. As views differ on the rationale for the split, final approval and the actual allocation of businesses still need to be confirmed.

Shareholder-Return Pledge Links to a Revaluation

On the 16th, Kakao presented its shareholder-return plan. KakaoAI plans to use 20–35% of its standalone adjusted free cash flow (FCF) as a basic source of shareholder returns. KakaoX said it would use 30% of its subsidiaries’ dividends on an after-tax basis and 30% of investment gains as sources of shareholder returns. The plan also includes a 300 billion won share buyback and cancellation funded by gains from the sale of Dunamu.

The key in this structure is not the percentages themselves but whether the funding can actually be realized. KakaoAI’s return amount will grow only if standalone adjusted FCF is generated, while KakaoX’s returns depend on subsidiary dividends and investment gains. If the plan is executed, cash returns could offset the complexity created by the split, but if cash flow falls short of expectations, the shareholder-return pledge will not lead to a better valuation.

Scenarios and Indicators Investors Should Track Separately

The bullish scenario is one in which the split proceeds as scheduled and the responsibilities of the two companies become clear. If KakaoAI sustains FCF-based returns and KakaoX actually deploys funds from dividends and investment gains, investors will have a basis for assessing business values and capital allocation separately. Conversely, if approval or the schedule is delayed, or if the division of roles remains unclear, initial uncertainty will persist and recovery in subdued market sentiment will also be delayed.

• Split process: Check whether the January 1, 2027 split date and the amended listing and relisting scheduled for January 27 proceed as planned.
• KakaoAI cash flow: Monitor whether standalone adjusted FCF is generated and whether 20–35% of it is actually returned to shareholders.
• KakaoX funding: Track whether the plan to use 30% of subsidiary dividends and 30% of investment gains is executed, along with progress on the 300 billion won share buyback and cancellation funded by gains from the Dunamu sale.
• Market reaction: If the share price recovers after split-related disclosures and follow-up explanations, that would signal that expectations for the restructuring are being reflected. Continued declines, however, could indicate that execution risks are prevailing.

This article is automatically summarized and analyzed based on the original news report. View original (Maeil Business Newspaper Securities)