Kakao Pay's stock price is plummeting in early trading. The drop is attributed to increased concerns over overhang (large potential sell volumes) following news that Alibaba Group, the second-largest shareholder, issued a large short-term exchangeable bond (EB) based on its stake in Kakao Pay.
As of 9:18 a.m. on the 3rd, Kakao Pay's stock is trading at 52,200 won, down 5,600 won (9.69%) from the previous trading day.
The previous day, Alibaba announced that it would issue overseas EBs targeting 11,445,638 shares (8.47% equity) of Kakao Pay it holds. The exchange price is set at 54,744 won. In terms of monetary value, this totals 626.58 billion won. The bond issuance date is scheduled for the 2nd of next month, with a maturity date three months later, on December 29 this year.
Earlier this July, Alibaba also announced it would issue overseas EBs targeting 4,796,168 shares, equivalent to 3.55% of its holdings in Kakao Pay. This EB also had a three-month maturity, just like the current one.
The market is interpreting this EB issuance as effectively a block deal (large-scale trading outside market hours). It is inferred that Alibaba, feeling burdened by recovering its investment, issued the EB to sell its stake in the market. In June 2022, Alibaba disposed of 5 million shares (3.8% equity) of Kakao Pay in a block deal, and in March last year, it sold another 2.95 million shares (2.2% equity) to recover its investment.