[Reporter's Notebook] Korea Development Bank Moves in the Opposite Direction of the New Commercial Act

Controversy Over Pre-IPO Investments in Listed Conglomerate Subsidiaries
A Move Contrary to the Policy Direction Set by Commercial Act Revisions
Trust Must Be Shown by Prioritizing Shareholder Protection

Recently, Korea Development Bank decided to participate in a pre-IPO investment round for HD Hyundai Robotics, the robotics subsidiary of HD Hyundai. Together with private equity firm KY Private Equity, it plans to invest approximately 200 billion won. At first glance, this may seem like a simple investment, but a closer look reveals that this move runs directly counter to the direction of capital market reform promoted by the government.

A pre-IPO is an investment that a company receives at the final stage before going public (IPO). The system itself is not inherently problematic. Major domestic unicorns (unlisted startups valued at over 1 trillion won) such as Toss, Market Kurly, and Yanolja have also raised funds this way to fuel their growth.

The issue arises when a pre-IPO is conducted by a subsidiary of a listed conglomerate. For ordinary shareholders, this is perceived as a red flag. In the past, when subsidiaries of large corporations carried out pre-IPOs and then proceeded to list, there were massive sell-offs by institutional investors, and major shareholders often used the process as a means to secure funds to strengthen their control. As a result, controversies over "split listings" followed, diluting the interests of parent company shareholders, increasing distrust across the market, and contributing to the so-called "Korea Discount."

The Lee Jaemyung administration has made the protection of minority shareholders its top priority in capital market reform. The ruling party also pushed through amendments to the Commercial Act despite opposition from the business community. In this context, it is baffling for Korea Development Bank, a state-run bank, to participate in a pre-IPO for a listed conglomerate's subsidiary. While it may be understandable for a private equity fund, which is focused solely on capital and profit, Korea Development Bank must also consider government policy direction and market trust.

Moreover, HD Hyundai Robotics does not lack funds to the extent that it needs to attract external capital. HD Hyundai Group has recently risen to fifth place in the business rankings on the back of a boom in the shipbuilding industry. HD Hyundai Oilbank continues to generate steady cash flow, and HD Hyundai Electric's transformer business is expected to benefit directly in the era of artificial intelligence (AI). In the first quarter of this year, HD Hyundai, the holding company that owns 90% of HD Hyundai Robotics, posted a separate operating profit of 260.5 billion won.

If Korea Development Bank truly wanted to bet on the future of the robotics industry, it should have first looked at universities, promising startups, or venture companies, rather than conglomerate subsidiaries. Even for conglomerate subsidiaries, it should have at least drawn a line with companies that have signaled intentions for "split listings." The current situation is reminiscent of when Korea Development Bank intervened in the Hanjin Group management dispute. At that time, the bank cited industrial stability and protection of the national economy as justifications, but in the end, it led to controversy over preferential treatment for conglomerates.

If the government claims to champion shareholder protection, public funds should at the very least be restricted from participating in pre-IPOs of listed conglomerates, and conditions for protecting minority shareholders should be attached. Ultimately, the root problem behind the Korea Discount is "trust." If the government and public institutions take the lead in undermining trust, even the best policies will struggle to gain credibility in the market.