From the evaluation of the Korean version of the Bill Gates model to the point that it is intended to shift the suspicion of management succession. There are a lot of talks surrounding the “half of property donation” by Kakao Chairman Kim Bum-soo.
Chairman Kim’s share of Kakao is worth 10 trillion won at the current market price. Even half of this is giving back a whopping 5 trillion won to society.
It is inevitable that attention is drawn to each issue in that it is a’large’ donation that cannot be found in Korea. In relation to Chairman Kim’s return of property, the scale of his property and controversy were discussed.
The value of Kakao’s stake in Kakao 3 times ’10 trillion’ in one year
Chairman Kim is one of the best stocks rich. The value of his share of Kakao (12.17 million shares, 13.75%) is 5,61 trillion won based on the closing price of the previous day (9th). If you add 4.57 trillion won worth of Kakao holdings (993 million shares, 11.21%) of K Cube Holdings, Chairman Kim’s private company, it amounts to 10 trillion won.
This is the highest among the stock codes of listed companies in Korea. It is also an overwhelmingly large amount compared to the equity value of other major internet company founders, such as Naver’s Hae Jin Lee (2 trillion won) and NCsoft Kim Taek Jin (2 trillion won).
The value of Chairman Kim’s stake has risen sharply over the past year. This is because Kakao’s share price showed an unprecedented rise in the early last year due to the benefit of untact (non-face-to-face) from the aftermath of Corona 19.
Considering that Chairman Kim’s stake in Kakao at the beginning of last year was 3.37 trillion won, it has tripled over a year. The topography of Korea’s wealth changed as the domestic stock market fluctuated in the aftermath of the coronavirus, and Chairman Kim is at the center of that.
Kakao’s performance itself is growing terribly. Last year’s consolidated operating profit rose more than double from the previous year to 458 billion won, and sales rose 35% to 4 trillion won, respectively, the highest. With a market capitalization of 42 trillion won, Kia Motors, Hyundai Mobis, LG Electronics, and SK Innovation were pushed out of chaebol affiliates and reached the top 10 in the KOSPI.
Most stock assets than cash
Chairman Kim has not had such an exit (EXIT) to date since Kakao was founded. In this regard, most of his holdings are estimated to be held by Kakao shares.
Chairman Kim’s own Kakao shares reached 12.57 million shares in the early years when Kakao and Daum Communications merged to form a consolidated corporation (October 2014), but now it is only 12.17 million shares, a decrease of 400,000 shares.
The decline in the number of shares is due to donations for social contribution and donations to relatives over the past 7 years. However, there has never been a time when stocks were converted into cash for the purpose of realizing profits.
K Cube Holdings, Chairman Kim’s private company, has sold Kakao stocks on the market several times since the inauguration of the integrated corporation Kakao and converted them into cash. However, it is not a scale that makes sense either by number of shares or by amount. K Cube Holdings’ Kakao shares decreased by 20,000 shares from 9.95 million to 9.93 million during this period.
It can be said that the cash dividends steadily received from the company are the only cash that Kim has come into the hands of. Kakao has been paying cash dividends for six consecutive years since 2015 since the inauguration of the integrated corporation. Although the dividend amount is jagged, a total of 20 billion won came in from Chairman Kim and K Cube Holdings during this period.
Suspicion of management succession due to the donation of children and employment in private companies
The’unprecedented declaration’ of donating half of the property unfortunately has produced various interpretations in that it came out after the suspicion of the succession of the management of the children of Chairman Kim was raised. There is a view that Kim made such a decision in consciousness of the recent controversy rather than reflecting his usual beliefs and making his wealth good.
The suspicion began with the donation of shares to Chairman Kim’s children and relatives. Chairman Kim donated 330,000 shares of stocks held last month to a total of 14 relatives, including his wife and two children, at a market price of 145 billion won.
With this donation, Chairman Kim’s wife, Hyung Mi-seon and their children Sang-bin and Ye-bin, became the first shareholders of Kakao. The total value of the shares held by these three is 79 billion won, which is more than half of the total gift value.
Regarding the donation of Chairman Kim’s stock, the company explained, “Since it is Chairman Kim’s personal affair, there is nothing to explain at the company level.”
Some analyzes are emerging as to whether Chairman Kim’s donation of children’s shares is a move for management succession. Chairman Kim usually expressed his conviction that he would not pass the management rights to his children, but he said he was preparing for the second generation management, not different from the founders of other chaebol companies.
In particular, the suspicion arose as it was later known that Kim’s two children joined K Cube Holdings side by side last year. Kakao’s second-largest shareholder and Chairman Kim’s strong control over Kakao, but it is a perspective that hiring children to K Cube Holdings, which is indispensable, is a pre-suspended work for succession.
Chairman Kim Presence of private company K Cube Holdings
K Cube Holdings is a private company named by many relatives of Chairman Kim. At the beginning of the company’s establishment, Chairman Kim’s brother-in-law, In-woo Hyung, served as the CEO (2007-2013). His wife, Hye-yoon Yeom and Chairman Kim, and his wife, Mi-sun Hyung, were also named as registered officers.
After his brother stepped down from the K Cube Holdings representative, Kim Hwa-young, the younger brother of Chairman Kim, took over as the new representative. At the end of last year, Hwa-young resigned from the CEO after 7 years, and as an executive director, Kim Tak-heung (55), was appointed as the new head of the company, the color of relatives diminished. Suspicion came out whether it was a thing or not.
In the end, K Cube Holdings showed a busy management move, such as opening a management consulting company called’K Cube Impact’ with 50 million won in capital in August of last year, when the children of Chairman Kim joined the company. In addition, at the end of last year, it merged and organized a real estate subsidiary, Typo Invest.
As a result, the vertical integration structure from Chairman Kim → K Cube Holdings → T4 Invest changed to Chairman Kim → K Cube Holdings → K Cube Impact. Chairman Kim’s two children are known to be learning venture investment business at K Cube Holdings.
“Constant donation activity, ready return to society”
Kakao’s position was “a nonsense” as a lot of backs were said about donating property. By emphasizing the details of Chairman Kim’s steady donation and remarks he made at the official ceremony, he refuted that it was not’out of the blue’ but that it was a prepared donation.
Indeed, Chairman Kim is active in social contribution activities. He is interested in creating youth jobs and fostering innovative entrepreneurs like himself. In April 2018, he led the establishment of Kakao Impact, a non-profit organization dedicated to social contribution activities.
To solve social problems, the company is continuing its extensive donation activities. Chairman Kim donated 10,000 shares of Kakao shares to Ashoka Korea three times from 2016 to 2018, a total of 30,000 shares. At the time, it was worth about 3.5 billion won. From 2019, K-Cube Holdings has been making donations using Kakao stocks.
From 2016 to 2018, we donated 10,000 shares three times a year, a total of 4 billion won worth of stocks, to the culture, art and social contribution network that conducts urban regeneration projects. At the beginning of last year, it released 2 billion shares worth of stocks to overcome the damage of Corona 19, while Kakao stocks worth 1 billion won to recover from the summer torrential rains.
Together with the scholarship of the alma mater, Konkuk Ambassador’s High School, donations to the Game Human Foundation, which is a game worker support group, and donations to the venture donation fund, the C program, they have invested over 20 billion won over the past 14 years.
It is explained that the return of half of the property is not an accidental and arbitrary decision. It is said that Chairman Kim had a fortune a year ago.
In March of last year, in celebration of the 10th anniversary of the Kakao Talk service, Chairman Kim said in an official message to executives and employees, “I want to be interested in social issues and find a way to resolve them more actively.”
In this regard, an official from Kakao said, “I answered it one year after I threw a message to find a way to solve social problems in March last year.” You can see that there is a lot of interest.”
In addition, he said, “Isn’t it possible to make a decision to suddenly release the assets of several trillion won in common sense?” He said. “There seems to be excessive speculation due to the expedient gifting and succession of some chaebols.”
How to Donate Property?
Chairman Kim did not specifically comment on how to donate the property. He delivered a New Year’s message to Kakao employees on the 8th and announced that he would hold a meeting with employees in the future to hear their opinions on how to donate. As he said he would open up opportunities for employees to participate, it seems that he had in mind the connection with the Kakao business.
Kakao founded a non-profit organization called Kakao Impact in 2018 for social contribution. Kakao and Kakao M, a subsidiary of Kakao, jointly invested 4 billion won, and Chairman Kim led the establishment.
Kakao Impact is a company in charge of Kakao’s social contribution business along with’Kakao Values’ and’Kakao Makers’. Social contribution has been emphasized by Chairman Kim from the beginning of Kakao’s establishment, and he has particularly focused on the concept of social impact that companies can do.
Social impact means solving social problems and achieving financial results by pursuing system changes in one field or society through innovative ideas.