Kakao Corp shares tumbled after a data center fire disrupted service at the Internet giant over the weekend, intensifying scrutiny of its outsized importance in Korean life.
The company’s stock dropped as much as 9.5 percent to the lowest since May 2020 before closing 5.9 percent lower. It was one of the biggest drags on the benchmark KOSPI yesterday, along with affiliates Kakaopay Corp and KakaoBank Corp.
The blaze halted messaging, payment, gaming and other popular services for hours on Saturday.
Photo: Reuters
Kakao said that as of yesterday morning, major services of KakaoTalk, South Korea’s No. 1 messaging app, had been mostly restored, while mail and map services remained limited.
KakaoBank said that all of its services had returned to normal.
The incident drew further criticism of the nation’s dependence on the group, which has met with public complaints and regulatory crackdowns over its market dominance after rapid growth. Kakao’s stock is nearly 60 percent lower this year, while KakaoBank has shed more than 70 percent and Kakaopay has plunged 80 percent.
“We will do our best to improve until the services are fully recovered,” Kakao said yesterday.
The firm expects the disruption to have a limited impact on its revenue, it said in a regulatory filing.
South Korean President Yoon Suk-yeol on Sunday ordered the government to support recovery of operations and called for an investigation into the cause of the incident.
“Although the network is run by a private company, it’s practically national communications infrastructure,” he said yesterday.
“If a monopoly or an oligopoly causes market distortions and acts like national infrastructure, I think the government should take action,” he said.
The presidential office said it would establish a cybersecurity task force led by Yoon’s national security director, as the incident was “a matter of national security.”
Lawmakers slammed Kakao for the lack of a contingency plan and said that they could roll out new regulations, including revising the existing broadcasting communications development law.
“It has solely engaged in reckless business expansion such as M&As and IPOs,” ruling People Power Party spokeswoman Yang Kumhee said, referring to initial public offerings by several Kakao units in the past few years.
“If the principal of self-regulation leads to a loss of such, there is no choice but to reconsider the government’s management and supervision methods,” she said.
Some analysts see a negative impact on Kakao’s fourth-quarter earnings as it might have to compensate for service disruptions and rivals gaining traction.
The incident is also seen worsening sentiment toward Kakao and its affiliates, which have high ownership among the nation’s day traders.
“The incident comes as public opinion is low on Kakao, as share prices have slumped since last year and some executives have sold shares at affiliates after going public,” NH Investment & Securities Co analyst Ahn Jae-min said. “We expect the short-term sentiment toward Kakao could be negative.”
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