LG Energy Solution, Restarting the Biggest IPO Ever

Reflecting Battery Fire Provisions in Financial Statements to Resume IPO Preliminary Review
Focus on IPO Offering Price and Structure... Interest in LG Chem's Secondary Share Sale
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[Asia Economy Reporter Hwang Yoon-joo] LG Energy Solution is drawing renewed attention to its initial public offering (IPO) schedule after reaching an agreement with General Motors (GM) in the U.S. regarding the recall costs of the Chevrolet Bolt.

According to industry sources on the 15th, LG Energy Solution plans to reflect the recall-related provisions agreed upon with GM in its financial statements by the first week of next month and then request the Korea Exchange to resume its listing review. If it passes the review, the IPO could take place as early as the end of December or by February next year at the latest.

The market estimates the market capitalization to range from a minimum of 50 trillion won to a maximum of 70 trillion won, making it the largest IPO in Korean history. However, variables such as provisions related to battery fires and the U.S. tapering (reduction of asset purchases) have changed compared to before.

There is also interest in whether LG Energy Solution’s public offering structure will be a ‘two-track’ approach involving both new share issuance and existing share sales. Existing share sales refer to the sale of shares held by current shareholders to public investors through the IPO. Currently, LG Chem owns 100% of LG Energy Solution’s shares.

The background for expectations that LG Chem will engage in existing share sales lies in investments in battery materials. In July, Shin Hak-cheol, Vice Chairman of LG Chem, announced plans to invest 10 trillion won in three new growth sectors based on ESG (environment, social, governance): battery materials, eco-friendly materials, and new drugs. Of this, 6 trillion won is planned for the battery materials sector alone. Industry analysts believe that part of this investment fund will be raised through existing share sales.

How much the recall provisions related to battery fires will affect the public offering price is also a key issue. Although the recall costs were agreed upon at a lower level than expected, the IPO conditions have changed since before the recall incident. A battery industry analyst said, "It cannot be said that the provisions related to fires have no impact on the public offering price, and whether fires recur could also affect the stock price in the future."

Some analysts suggest that LG Energy Solution could borrow funds through green bonds or other means based on a public offering amount of around 10 trillion won. This is because it presents an opportunity to borrow under favorable conditions during a period of rising interest rates.

An industry official said, "LG Energy Solution is a unique company in the secondary battery sector, so the IPO success is not in question. However, since market uncertainties such as interest rate hikes and stock market adjustments have increased compared to when the IPO was first discussed, they are likely considering various methods such as raising only part of the funds (3.5 to 4 trillion won) through the IPO and then raising the remaining amount as the battery business grows and the stock price rises."