Kakao has officially announced its opposition to the proposed U.S. American Depositary Receipt (ADR) listing of its subsidiary Kakao Mobility. The decision stems from the assessment that the current structure—based solely on shares held by second-largest shareholder TPG, a private equity firm—offers no economic benefit to Kakao or its common shareholders.

Kakao announced after market close on the 22nd that its board of directors had resolved to oppose the ADR listing under the current structure. Kakao Mobility had previously submitted a confidential registration statement (Form F-1) to the U.S. Securities and Exchange Commission (SEC) on July 2. The offering size discussed in the market was approximately $1 billion (around 1.4 trillion won).

This transaction differs fundamentally from a typical initial public offering (IPO) in which Kakao Mobility would issue new shares to raise capital. It more closely resembles a “sponsored ADR” structure, where TPG’s existing shares are deposited with a depositary institution and ADRs are issued against them for sale to U.S. investors. Even if the listing succeeds, no new capital would flow into Kakao Mobility or Kakao, which holds a 57.18% stake.

Kakao’s board publicly detailed its reasons for opposition. The core argument: it is difficult to assess that liquidating a specific financial investor’s stake translates into economic benefit for the company’s common shareholders. The board also cited potential dispersion of investment demand between Kakao and Kakao Mobility, possible expansion of Kakao’s net asset value (NAV) discount due to dual listing, increased complexity in corporate valuation, and potential conflicts of interest between the two companies’ shareholders.

Kakao determined that bearing liability under U.S. securities law—while receiving no incoming capital—offers limited capacity to address the imbalance in economic benefits as a shareholder protection measure. However, the company drew a line, clarifying that it does not deny the financial investor’s need to recover its investment. Kakao indicated it may reconsider the ADR listing if the listing structure changes or if economic benefits accruing to Kakao and its common shareholders expand. The company plans to disclose relevant details again when specifics are finalized or within six months.

TPG’s Nine-Year Investment and Recovery Struggles

The conflict between TPG and Kakao stems from structural issues that have accumulated over an extended investment period. The TPG consortium invested 500 billion won (approximately $368.2 million) in 2017 when Kakao Mobility was launched, and added another 130.7 billion won (approximately $96.2 million) in 2021. Its current stake is approximately 29%. At the time of the initial investment, recovering funds through an IPO by 2022 was cited as the primary exit strategy.

Kakao Mobility began preparing for a domestic listing in 2021, selecting Korea Investment & Securities and Daishin Securities, along with Morgan Stanley, Citi, and Credit Suisse as underwriters. However, the timeline was halted amid controversies over encroachment on small businesses, allegations of call-routing favoritism for franchise taxis, and a stock option sale scandal involving Kakao Pay executives.

In 2022, Kakao pursued a plan to transfer part of its Kakao Mobility stake to MBK Partners, stepping down from its position as second-largest shareholder. The transaction would have included stakes held by existing investors such as TPG, but negotiations were abandoned due to opposition from the labor union and internal employees. In 2023, the Financial Supervisory Service (FSS) began an audit into franchise taxi fee accounting practices, further complicating any IPO resumption.

With exit channels successively blocked, TPG established a Shareholder Value Enhancement Committee under Kakao Mobility’s board in May this year and secured a majority of seats. The committee reportedly selected a U.S. ADR as the new exit route and appointed Bank of America, Morgan Stanley, and UBS as underwriters. However, observers noted that completing SEC review and a U.S. listing would be difficult without cooperation from Kakao, the largest shareholder.

Future Scenarios and Market Impact

With this board resolution, the current ADR listing approach is now highly likely to be effectively suspended. However, since Kakao has left room for reconsideration, alternative discussions are expected to continue. Options that may return to the table include Kakao buying back TPG’s stake, selling to a third party, or structuring a concurrent new share issuance that would channel capital into Kakao Mobility itself.

Kakao’s stock closed up 2.86% at 34,150 won (approximately $25) in regular trading on the day, before the disclosure. Since the announcement came after market close, market reaction is expected to materialize starting the next trading day.

Kakao Mobility’s enterprise value has been discussed in the market at a range of 7 trillion to 10 trillion won (approximately $5.2 billion to $7.4 billion). TPG’s stake is estimated to be worth approximately 2 trillion to 3 trillion won (approximately $1.5 billion to $2.2 billion). If the ADR listing falls through or is delayed, the timing of TPG’s investment recovery could become even more uncertain. On the other hand, from Kakao’s perspective, the decision may be viewed positively as it blocks NAV discount risk and maintains stable governance.

The key question going forward is what compromise Kakao and TPG can reach. With Kakao having clearly stated its principle of prioritizing common shareholder interests while acknowledging the financial investor’s need for recovery, negotiations to reconcile the two sides’ interests appear inevitable.