Korea's Kakao Entertainment Wins $966m From Wealth Funds

Kakao Entertainment – a unit of Korean tech conglomerate Kakao Corp – has received investment of 1.2 trillion won (over $966 million) from two leading sovereign wealth funds.

The funding, from Singapore’s GIC and Saudi Arabia’s Public Investment Fund (PIF), is the biggest foreign investment in a South Korean content company.

Analysts said the news is a sign of investors’ faith in the potential of Korean content and its appeal despite the weak economic outlook, which has dried up liquidity in many other sectors.

GIC and PIF will each invest 600 billion won in the entertainment firm, local newspaper Korea Economic Daily reported on Thursday, citing unnamed investment banking sources.

Kakao, however, did not name the sovereign wealth funds in its statement. GIC and PIF did not immediately comment.

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K-Pop, webtoons, gaming

Kakao Corp shares rose 1% in early morning trade, outperforming a 0.2% rise in the wider market.

“It’s significant that we were able to secure funds of this scale at a time when both the Korean and global markets face a lot of uncertainty and investment sentiment is weak,” Kakao chief investment officer Bae Jae-hyun said.

Unlisted Kakao Entertainment has a business portfolio ranging from K-Pop – including artist management – to shows, movies, and online-targeted, comparatively low-cost content such as comics called webtoons and serial web novels.

“Webtoons and web novels are steadily being turned into successful dramas and other formats, so investors think this is good value and timing to invest in an intellectual property holder,” said Kim Jin-woo, analyst, Daol Investment & Securities.

“Having secured funds, Kakao Entertainment may seek to strengthen its artist lineup that can better target overseas markets via M&A or other ways.”

Saudi Arabia’s PIF separately revealed in a Japanese regulatory filing on Thursday that it boosted its stake in Nintendo Co Ltd from 5.01% to 6.07%.

The sovereign wealth fund has increased its exposure to the Japanese video gaming industry recently, having taken stakes also in video game companies Nexon, Capcom, and Koei Tecmo.