Experts divided over Kakao's plan to split into AI and investment companies

Kakao’s plan to split into an AI-focused company and an investment company is dividing experts who question whether restructuring can offset the company’s weak position in the AI market.

The tech giant, best known for its KakaoTalk messaging app, announced on Friday that its board had approved a plan to divide the company into two: KakaoAI, which will handle KakaoTalk and AI operations, and KakaoX, an investment company that will oversee the remaining affiliates. The spinoff is intended to simplify a corporate structure that currently spans dozens of subsidiaries.

“Kakao is undervalued by roughly 50 percent compared to its market value, largely because most of its businesses are entangled within a single conglomerate,” said Kakao Investment and KakaoX CEO Kim Do-young on Friday. “Each business carries different levels of risk and profitability, and we determined that separating them to maximize each one’s individual value is what meets investors’ needs.”

Experts are skeptical, however, as Kakao still hasn’t presented a new growth driver in the AI market.

Kakao developed its own AI based on KakaoTalk in 2024 but has seen limited results. Last May, the company attempted a rebound by launching Kanana, an AI-agent app, but monthly active users plunged from about 70,000 in May last year to roughly 17,000 just three months later, according to app analytics platform Mobile Index.

Kakao has since integrated Kanana into KakaoTalk rather than expanding it as a stand-alone platform, effectively eliminating any channel besides the messaging app for showcasing its AI services.

Compounding the concern, Kakao Enterprise, the data center operator that serves as a core player in the AI market, will remain under KakaoX rather than KakaoAI — a structure that inevitably weakens Kakao’s stated ambition, according to critics.

“Kakao’s AI business itself isn’t performing well, which is why the market is undervaluing it. A spinoff alone won’t suddenly fix that,” said Oh Dong-hwan, an analyst at Samsung Securities.

The stock market’s reaction has been similarly cold. Kim unveiled the split, as well as a shareholder-return policy, on Friday morning, but Kakao’s stock still plunged 7.5 percent that day.

Analysts attribute the reaction to lost investor trust following Kakao’s history of repeated spinoff listings. In 2021, Kakao listed a series of subsidiaries, including Kakao Pay and Kakao Bank, in quick succession, and the move to carve off core businesses that had driven Kakao’s profits frustrated shareholders. The company was then embroiled in controversy after subsidiary executives sold off large stakes shortly after their listings — the “cash-and-run” backlash.

Some observers, however, defend Kakao’s decision as an unavoidable step to simplify its corporate structure, speed up decision-making and accelerate the integration of KakaoTalk and AI.

“As long as Kakao remains one large, unwieldy company, it can’t move fast enough on decisions for any specific business,” said Yoo Byung-joon, a business professor at Seoul National University. “Right now, there’s no better option than this split.”

BY OH HYEON-WOO [[email protected]]