Kakao's union members stage a protest against the firm's plan to spin off its portal service, Daum, as an independent entity in front of its office in Seongnam, Gyeonggi Province, Wednesday. Yonhap
Employees fear mass layoffs amid plan to spin off Daum
By Lee Min-hyung
Major affiliates of Kakao, the country's leading mobile platform operator, are facing growing regulatory pressure, which its labor union says stems from the company's excessive spin-offs of subsidiaries.
The once-promising mobile startup is rapidly losing the trust of both investors and customers due to its ongoing involvement in multiple regulatory issues.
On Monday, Kakao Entertainment was slapped with a 390 million won ($265,000) fine for deceptive advertising practices. The company promoted its music content through social media channels without officially disclosing its ownership of those accounts, according to the latest investigation by the Fair Trade Commission.
Other Kakao subsidiaries are also being investigated for allegations of unfair business activities.
Kakao Mobility, which operates the nation’s leading taxi-hailing service, is under investigation on suspicion of inflating the firm’s revenues. Last week, the prosecution launched a search and seizure into the firm’s office in Seongnam, Gyeonggi Province, as well as the residences of its key executives.
Jung Joo-hwan, the former head of Kakao Mobility, has also come under intense criticism for recently exercising stock options worth 9.5 billion won. While the act may be legal, critics and investors argue that it raises concerns about the moral hazard posed by the company’s former leadership.
Employees' anger reached a boiling point following Kakao's plan to spin off Daum, the country's second-largest portal site, which it merged with in 2014.
The latest decision sparked significant outrage among Kakao employees, who argue that it will lead to layoffs for hundreds of staff members.
“Kakao’s management also hinted at the possibility of selling stakes of the company, so the latest spin-off decision is nothing more than its sales,” an official from Kakao’s labor union said.
Kakao’s labor union estimates that around 1,000 employees working at Daum could lose their jobs following the upcoming spin-off.
The union has also stepped up criticism of Kakao’s management for sparking the ongoing corporate crisis, as they are focusing on spinning off multiple subsidiaries “excessively without enough preparation.”
“Kakao’s crises stem from the indiscriminate spin-offs,” the union member said. “Such excessive spin-offs and subsidiary sales ended up deteriorating employees’ work environment and causing conflict among the employees.”
Investors are also losing confidence in the company for its unceasing involvement in a series of controversies.
The company's stock price peaked at 173,000 won per share in June 2021 but has since fallen to a three-year low of 32,550 won in November 2024. It has slightly recovered to just over 40,000 won this year, but there are no clear signs of a sustained recovery.