Naver’s acquisition of Dunamu is running into more headwinds than expected. Even after the deal is completed, regulatory limits on major shareholders of cryptocurrency exchanges will remain a variable. If Naver tries to ease that burden by listing Dunamu, it would then have to clear scrutiny over duplicate listings. For Naver, the bigger challenge has become not just bringing Dunamu into the fold, but figuring out how to use it afterward.
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According to Naver, the completion date for the comprehensive share exchange between Naver Financial and Dunamu has been pushed back by three months to Sept. 30. Naver said the schedule was adjusted to reflect approval procedures and the progress of related legal revisions. Once the deal is completed, Dunamu will become a wholly owned subsidiary of Naver Financial. Together with Naver Financial and Dunamu, Naver plans to target the global digital finance market by combining AI and Web3.
The delay in the comprehensive share exchange between Naver Financial and Dunamu is widely seen as tied to the proposed Digital Asset Basic Act. The issue is that regulatory hurdles remain both before and after the combination of Naver Financial and Dunamu. The core of the bill is to limit the stake held by major shareholders in cryptocurrency exchanges. However, the government and the ruling party have yet to decide exactly how far those shareholding limits will go.
A government-party policy consultation on the matter had been scheduled for March 5, but it was postponed because of the Middle East war. The Digital Asset Basic Act was also excluded from the agenda of the Legislation Review Subcommittee under the National Assembly’s Political Affairs Committee on March 31. Given the June local elections, there is growing speculation that discussion of the bill will not resume until the second half of the year.
Because Dunamu operates Upbit, a cryptocurrency exchange, the company’s governance structure would inevitably have to change if the bill takes effect. Naver, Naver Financial and Dunamu all fall directly within the scope of the proposed law. The government and the ruling party are reportedly reviewing a plan to cap major shareholders’ stakes in crypto exchanges at 20 percent, with an exception allowing corporate shareholders to hold up to 34 percent. If that plan is finalized, Naver Financial would have to lower its stake in Dunamu to 34 percent or less.
An initial public offering by Dunamu could be one way to reduce the burden of those ownership regulations. Oh Kyung-seok, chief executive of Dunamu, said at the company’s annual shareholders meeting on March 31 that it would pursue an IPO as soon as the transaction with Naver Financial is completed. If new shares are issued in the IPO process, Naver Financial’s stake would be diluted and its ownership ratio would fall. Funds raised through the IPO could also be used to discover and expand new businesses.
But Dunamu’s IPO would not be simple either, because the government is trying in principle to ban duplicate listings. On March 19, the Financial Services Commission said that, in order to prevent harm to the rights and interests of ordinary shareholders in parent companies caused by duplicate listings, the exchange’s listing review process would apply a strict approach of “prohibited in principle, allowed only in exceptions.”
Under the FSC’s draft, the scope of duplicate-listing regulation would cover not only subsidiaries but also affiliates including second-tier subsidiaries in vertical ownership structures. Dunamu is expected to become a second-tier subsidiary of Naver. If Dunamu goes public, another issue would be the potential erosion of Naver shareholder value as Naver’s financial assets are effectively spun off.
An even bigger concern is the possibility that, after the merger, Naver may fail to maintain control over Naver Financial and therefore be unable to consolidate Dunamu into its earnings. In that case, Dunamu’s revenue and operating profit would not be added to Naver’s consolidated financial statements. Dunamu’s performance would instead be reflected only as equity-method profit in Naver’s net income. That raises concerns that Naver could end up with a “shiny shell with little substance,” taking on shareholder backlash over a duplicate listing and regulatory risk tied to digital assets while gaining none of the benefits of top-line growth.
Kim Kwang-sik, a lawyer at law firm Cheongchul, said, “Investment agreements often include clauses requiring the investee company to pursue an IPO within a certain period, so it is highly possible that Dunamu also set such an obligation during previous fundraising rounds. It also appears likely that the possibility of a major shareholder stake cap under the Digital Asset Basic Act, which is pending enactment, was taken into account in a comprehensive manner.”
He added, “Even if Naver’s direct stake in Naver Financial is diluted to below 20 percent, it is expected to receive delegated voting rights in Naver Financial from Dunamu Chairman Song Chi-hyung and Vice Chairman Kim Hyung-nyeon. Even if Dunamu goes public after this comprehensive share exchange is completed, it would be difficult to say that Dunamu’s performance would have no bearing on Naver’s stock price.”
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