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Kakao share price drops due to mistrust from public

Kakao Pay shares plummeted when it was revealed that Alipay, the company’s second-largest shareholder, was planning to sell 5 million shares in a block sale, accounting for nearly 10 percent of Alipay’s overall interest in Kakao Pay. Kakao Pay’s stock dropped 15.57 percent to settle at KRW 89,500 (USD 69.95).

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Despite the deal, Kakao Pay, the payment arm of the IT giant, claimed Alipay will remain a strategic investor and the second-largest shareholder, with 34.72 percent of Kakao Pay shares, and the two companies’ solid collaboration will continue.

Experts, on the other hand, believe this is the start of a bad trend. According to a local securities analyst, Alipay’s block deal still poses a danger of overhang, according to The Korea Herald. “Alipay holds a lot more Kakao Pay shares, so it could sell some of the remaining amount or more. This possibility of dumping off shares has a negative impact for other shareholders as it was seen in today’s price drop,” the analyst said.

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According to Park Sang-hyun, an insight provider at independent investing research network Smartkarma, Alipay’s return on its Kakao Pay investment is ten times, so it is normal to make a profit to some level.