Kakao’s ‘Kakao X’ Sidesteps Holding Company Rules, Retains Fintech Stakes — BigGo Finance

South Korea’s Kakao has chosen a spin-off over a holding company conversion, allowing it to retain its stakes in financial affiliates. By establishing “Kakao X,” a new investment and affiliate management entity that is not a legal holding company, Kakao has effectively circumvented the separation of banking and commerce regulations.

When reports emerged on the night of August 20 that Kakao would convert to a holding company structure and separate its KakaoTalk business into a standalone entity, market attention focused on the fate of its financial affiliates, including KakaoBank. This was because becoming a general holding company would trigger a ban on owning financial company shares under the Monopoly Regulation and Fair Trade Act.

However, the official restructuring plan Kakao unveiled the following day was a spin-off, not a holding company conversion. By dividing the existing entity into Kakao AI and Kakao X, the issue of unwinding financial affiliate stakes turned out to be a non-event — a case of premature worry.

Understanding why holding company conversion would have been problematic for Kakao’s financial affiliate ownership requires grasping the principles of holding companies and the separation of banking and commerce. A holding company is an entity that owns stakes in multiple subsidiaries and manages the group as a whole, divided into general holding companies and financial holding companies. Not every company with substantial affiliate shareholdings qualifies as a legal holding company; under the Monopoly Regulation and Fair Trade Act, certain criteria must be met, including asset size and the proportion of subsidiary share value.

The separation of banking and commerce is a principle that restricts housing financial and non-financial companies under one roof. It exists to prevent ordinary corporations from wielding control over financial institutions like banks, since corporate ownership of banks could create incentives to direct loans to struggling affiliates or provide funding on favorable terms — effectively using financial companies for private purposes.

Kakao’s ability to become KakaoBank’s largest shareholder stems from an internet-only bank exception. The current Internet-Only Bank Act permits non-financial shareholders to hold up to 34% of voting shares in internet-only banks to promote the convergence of finance and information and communications technology (ICT). This is why Kakao currently holds approximately 27% of KakaoBank and remains its largest shareholder.

The issue is that different regulations apply to Kakao as an ordinary operating company versus a general holding company. Currently, Kakao can hold KakaoBank shares under the Internet-Only Bank Act exception, but converting to a general holding company would subject it to the Monopoly Regulation and Fair Trade Act’s ban on financial company share ownership by general holding companies.

Under Kakao’s restructuring plan, Kakao X is not a legal holding company, but functionally it bears many similarities to one. It will receive and manage stakes in major affiliates including KakaoBank and Kakao Pay, along with investment assets, and will hold shares in multiple affiliates while overseeing group investment and capital allocation — effectively performing holding company-like functions. However, since it does not qualify as a general holding company under the Monopoly Regulation and Fair Trade Act, it faces no restrictions on owning financial company shares.

Kakao stated that the purpose of the split is to operate businesses with different characteristics and growth stages independently, accelerating decision-making and establishing tailored growth strategies and capital allocation systems for each. Through this spin-off, Kakao has separated its business operations from its investment and affiliate management functions while simultaneously avoiding the financial affiliate stake disposal issue that could have arisen during a holding company conversion.

Kakao has framed the restructuring around corporate value revaluation. According to the company, aggregating sum-of-the-parts (SOTP) consensus estimates from domestic and international securities research centers puts Kakao Group’s potential value at ₩34.2 trillion (approximately $24.9 billion), while its three-month average market capitalization stands at just ₩16.8 trillion (approximately $12.2 billion) — a gap of ₩17.4 trillion (approximately $12.7 billion). The diagnosis is that Kakao has suffered from a so-called “conglomerate discount” due to its complex business structure. However, critics note that this potential value is merely the sum of securities firms’ individual business valuations, and the gap will not automatically be reflected in the share price simply because of the split.

Kakao’s split ratio was determined based on net asset book value: 0.64 for Kakao X and 0.36 for Kakao AI. As of December 17, the record date for allocation of new shares, existing shareholders will receive shares in both companies according to the split ratio. The spun-off Kakao AI will operate platform businesses centered on KakaoTalk and AI, while Kakao X will handle future-value investments in techfin, content, and mobility.

What Kakao AI and Kakao X Will Each Do

Kakao founder and board chairman Kim Beom-su said, “We will redesign our growth structure with two engines — Kakao AI and Kakao X — so that the results flow back to shareholders, users, and crew members alike.” Chung Shin-a, the Kakao CEO designated to lead Kakao AI, explained that “this split is a decision to transform Kakao into a structure with the speed and accountability suited to the AI era.”

Source: Compiled from Kakao’s August 21, 2026 presentation materials.

The relationship between the two entities is summarized below.