LG Energy Solution’s IPO to be third biggest in South Korea

According to two sources familiar with the matter at hand, LG Energy Solution (LGES) is likely to place its IPO at the top of its indicative range at around $11 billion.

Institutional investors are betting heavily on booming demand for electric vehicles.

This pricing places LGES, a wholly-owned unit of LG Chem Ltd that counts clients such as Tesla, Hyundai Motor and General Motors as its clients, as the biggest IPO ever in South Korea.

Last week LGES said, it expects to offer 34 million new shares in an indicative price range of 257,000 to 300,000 won per share, which would raise around $10.9 billion (12.8 trillion won) at the top end when the IPO is scheduled to be launched on January 14.

“LGES’ IPO is drawing the hottest demand from institutional investors compared to any other South Korean IPOs this year,” said an investment banker with direct knowledge citing anonymity.

The source went on to add, “with just 14.5% of shares being offered to institutional and retail investors, prospective buyers would need to bid big to get an allocation”.

As per another source at a brokerage company, “the feedback so far from, mainly domestic, institutional investors indicated the IPO would easily come in at the top end”.

Sources preferred the cover of anonymity since they were not authorised to speak to the media.

A successful debut by LGES, which is scheduled to list on South Korea’s main stock exchange KOSPI on January 27, would kick off what is expected to be another strong year in the country’s IPO market after a record result this year.

According to the Korea Exchange, more than 20 companies have gone public on KOSPI in 2021, raising around 17 trillion won, thrashing the earlier 8.8 trillion won raised in 2010.

At top of the price range, LGES would have a market value of $59.39 billion (70.2 trillion won) making it South Korea’s third most valuable company after Samsung Electronics Co Ltd.  and SK Hynix Inc, which have valuations of $389.15 billion (460 trillion won) and $75.23 million (89 billion won), respectively.

Following the IPO, its parent LG Chem, would have reduced its stake to 81.8%.

According to analysts, the burgeoning demand for lithium-ion batteries for electric vehicles (EVs), along with LGES’ position as being a top-tier battery maker having a stable customer base, makes it particularly attractive to investors.

Global EV sales, estimated at 2.5 million vehicles in 2020, are forecast to grow more than 1200% to 31.1 million by 2030. EVs are slated to account for around a third of new vehicle sales, according to Deloitte.

“It’s not like you’re betting on an emerging battery manufacturer with limited customers and market presence,” said Cho Hyun-ryul, an analyst with Samsung Securities.

($1 = 1,183.0700 won)

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