[Featured Stock] LG Energy Solution Falls 3.09% on LG Chem Convertible Bond Issuance

LG Chem's subsidiary LG Energy Solution is showing weakness due to concerns over the supply burden from the issuance of exchangeable bonds (EB) by LG Chem.

As of 9:41 a.m. on the 12th, LG Energy Solution was trading at 533,000 KRW, down 3.09% (17,000 KRW) from the previous close.

The previous day, LG Chem announced that it would issue $2 billion (approximately 2.6 trillion KRW) worth of foreign currency exchangeable bonds using shares of its subsidiary LG Energy Solution. LG Chem is the largest shareholder, holding 81.84% of LG Energy Solution's shares. The exchange price was set around 700,000 KRW, applying a 25-35% premium to LG Energy Solution's previous day's closing price of 550,000 KRW.

If a full exchange occurs, approximately 3,695,000 shares will be subject to exchange, which corresponds to about 1.6% of the total issued shares of LG Energy Solution.

While LG Chem avoided a sharp stock price decline by choosing to issue exchangeable bonds instead of selling shares through block deals (large trades outside regular hours), some argue that the risk remains as the locked-up shares may be released into the market. There are also claims that LG Energy Solution's stock price could fluctuate whenever similar issues arise to raise funds for LG Chem's new business investments.