Kakao Entertainment Corp. is offloading unprofitable subsidiaries acquired during its aggressive expansion phase, as the company works to repair its financial health and potentially revive shelved IPO plans.
The entertainment unit of South Korea’s mobile giant Kakao Corp. has recently sold several properties including Next Level Studio, IST Entertainment, and a majority stake in 3Y Corporation, the company behind rising girl group QWER. These divestitures represent a strategic shift from Kakao’s previous acquisition-heavy approach, which had seen its subsidiary count balloon from 14 in 2020 to 53 by 2022.
The sales have already yielded results, with net borrowings halving to 347 billion won ($235 million) by the end of 2024 from 655 billion won in 2021. The company turned a profit of 69.2 billion won in 2023, reversing a 13.8 billion won loss from the previous year.
Industry observers believe these financial improvements could pave the way for Kakao Entertainment to resurrect its IPO plans, which have remained dormant since 2021. The company originally hired investment banks as IPO managers in 2019 but shelved those plans amid criticism over its rapid expansion.
US ventures have proven particularly troublesome, with digital comics platform Tapas Media and fiction app Radish Fiction now in liquidation after their 2021 acquisition. The company’s operating profit rose 16.5% year-on-year to 80.6 billion won in 2023, despite a slight decrease in overall sales.
