Korea's Kakao rose 3.48% on a rumor it would split in two. It fell 7.49% when the terms landed.

Kakao's board approved a plan on August 21 to split the company into two separate businesses, Kakao AI (카카오AI) and Kakao X (카카오X). Shareholders would receive stock in both resulting companies, with Kakao AI taking 36% of the net asset allocation and Kakao X 64%. The plan still needs shareholder approval at an extraordinary meeting on December 17.

For those that don't know, KakaoTalk (카카오톡) is a South Korean messaging application that about 49 million people use every month, nearly 95% of the country's population. Kakao built a whole ecosystem of everyday apps around it. Kakao T is its Uber and handles about 90% of app-based ride-hailing there; Kakao Map is its Google Maps, KakaoPay is its Venmo, KakaoBank is a licensed bank with more than 24 million customers, and Melon is its Spotify. The finance, content, and mobility businesses all go to Kakao X. KakaoTalk goes to Kakao AI.

Founder Kim Beom-su (김범수), also known as Brian Kim, framed it as a speed problem. "The AI era demands a different order of agility, so we are redesigning our growth structure with two engines, Kakao AI and Kakao X," he said in the company's announcement. Chief executive Chung Shin-a (정신아) called the split "a decision to shift Kakao into a structure of speed and accountability suited to the AI era."

Kakao AI is the newly created company, and Chung Shin-a, Kakao's current chief executive, will lead it. Kakao X is the one that keeps Kakao's existing listing, and it's meant to fund new bets in areas like virtual assets and physical AI with about 6.4 trillion won ($4.6 billion USD) in potential investment capacity, about 2.3 trillion won Kakao expects from liquidating holdings and 4.1 trillion won in investment funds held by its subsidiaries. Kim Do-young (김도영), currently the head of Kakao Investment, is set to run it.

Why the stock fell anyway

Investors didn't wait for the pitch. Kakao closed down 7.49% at 35,800 won ($25.83 USD) the day of the announcement, its worst day in weeks. Korean market coverage, including SisaJournal-e and Money Today, points to two reasons. One is Kakao's own math. The company says the sum of its individual businesses, as valued by Korean and foreign securities firms, comes to 34.2 trillion won ($24.7 billion USD), against an average market capitalization over the past three months of just 16.8 trillion won ($12.1 billion USD), about half. That difference is the case Kakao makes for splitting in the first place. The other reason is Kakao's history. It has separately listed affiliates before, including KakaoPay, Kakao Games, and KakaoBank, and Korean retail investors who felt those listings diluted the value of their original Kakao shares are wary of another one.

This wasn't a surprise so much as a disappointment. ZDNet Korea reported just after midnight on August 21 that Kakao had called an emergency briefing for 10 a.m. that morning, with a company insider confirming that a holding company conversion and a KakaoTalk spin-off were both on the table. Kakao had already risen 3.48% the session before on that speculation, and it traded as high as 38,750 won on the day itself, above the previous close, before the terms landed. The Korea Exchange then halted the stock for 30 minutes from 10:04 a.m., citing the material disclosure of the split; it was down 7.24% at 35,900 won going into the halt. The 30-minute halt ended at 10:34, and trading resumed at about 10:44 after a single-price auction, and by about 10:50 a.m. the stock was at 33,600 won, down 13.18%. The reversal from an early gain to a 13% drop inside the first hour points to an objection to the terms rather than to the idea of splitting.

This split works differently. It's an "인적분할," where existing shareholders receive stock in both resulting companies in proportion to what they already own, not a "물적분할," where the parent keeps the new subsidiary's shares and outside shareholders get nothing directly. Kim Do-young addressed the concern directly at a briefing the same day. "I can say with certainty that there is no plan whatsoever to convert Kakao X into a holding company in the future," he said.

Kakao's coordination body across its affiliates, known as the CA Council, won't be needed once the split is final, the company said, since Kakao AI and Kakao X will run independently. The extraordinary shareholder meeting is set for December 17, with the split effective January 1, 2027, and both companies trading separately, Kakao AI newly listed and Kakao X under a changed listing, from January 27, 2027.

Samsung and SK Hynix promised record shareholder returns the same week, which we wrote about here. Kakao paired its split with returns of its own: 300 billion won ($216 million USD) of buybacks and cancellations over three years, funded largely from selling its stake in Dunamu, plus standing payout formulas at both companies. The real test comes January 27, when Kakao AI and Kakao X start trading separately and the market decides whether they are worth more apart than the 16.8 trillion won it assigns them together.

Sources

• 카카오 뉴스룸, 카카오, 인적분할 결의, the company's own announcement, on the executive quotes, the split ratio and Kakao X's investment capacity.
• 머니투데이, 카카오, 분할 후 3년간 총 3000억원 규모 자사주 매입·소각, on the buyback commitment and the shareholder-return formulas.
• ZDNet Korea, 카카오, 21일 긴급 오픈톡…지주사 전환·카카오톡 분사 발표하나, published 00:08 on August 21, on the pre-announcement speculation and the 10 a.m. briefing.
• 한국경제, 카카오, AI와 X로 인적분할, on the split ratio, business division and timeline.
• 헤럴드경제, 카카오 'AI와 X'로 인적 분할, on Kim Do-young's holding company comment and the 2030 targets.
• 시사저널e, 카카오, 인적분할 결의하며 '저평가' 해소 강조, 당일 주가는 '폭락', on the stock's 7.49% fall and Kakao's sum-of-the-parts valuation difference.
• 비즈니스포스트, 카카오X 대표 내정 김도영 "지주사 전환 계획 없어", on Kim Do-young's direct quote and the CA Council's future.

Figures are converted from Korean won to US dollars at about 1,386 won to the dollar, the exchange rate as of August 21, 2026. This is general market commentary and not investment advice.