LS Responds to Dual Listing Controversy: "SI and Borrowing Are Not Realistic Alternatives... IPO Is the Optimal Decision"

Second Statement Following January 13 Announcement
Clarification Provided in Response to ACT’s Demands
“Concerns Over Conflicts of Interest, Technology Leaks, and Loss of Autonomy with SI”
Confident That Essex Solutions Will Increase Group Value

LS Group reiterated that the initial public offering (IPO) of its subsidiary, Essex Solutions, was “the optimal management decision made after considering various options such as attracting strategic investors (SI), borrowing, and paid-in capital increases.” The company issued this statement again on January 21, after previously releasing a similar position on the 13th. Despite the earlier statement, controversy persisted, and shareholders submitted demands, prompting LS Group to clarify its stance once more.

Essex Solutions Logo. LS

On January 21, LS released an explanatory statement in response to demands from the Minority Shareholders’ Alliance and the shareholder activism platform ACT, which had called for alternatives to the IPO such as attracting a strategic investor or a third-party paid-in capital increase.

LS is currently pursuing an IPO for Essex Solutions, its U.S.-based great-grandchild company that manufactures special winding wires essential for electric vehicle motors and transformers. Regarding the option of bringing in a strategic investor, LS stated, “There are significant concerns about conflicts of interest, and the likelihood of a successful deal is limited.” The company added, “There is a risk that technical know-how could leak externally, and if investors exert influence over management, business autonomy could be undermined.”

LS further expressed concern that “the golden window for investment decisions could be missed during the decision-making process.” The company explained that demand for special winding wires for transformers has been rising rapidly, with delivery times of four to five years after orders are placed, making swift decision-making crucial. LS also stated that methods such as a third-party paid-in capital increase or borrowing are not realistic alternatives.

LS explained, “Any paid-in capital increase must be approved by financial investors (FI),” and added, “Financial investors are unlikely to agree to a paid-in capital increase that is not premised on an IPO.”

Regarding the possibility of Essex Solutions borrowing directly from LS, the company argued, “An increase in the debt ratio and interest expenses would be inevitable, and in the medium to long term, the financial burden would likely be transferred to LS.” In addition, LS expressed confidence that the growth of Essex Solutions would directly lead to an increase in the group’s value. The company pledged, “We will share the growth gains of Essex Solutions, driven by the power supercycle, with the parent company’s shareholders, thereby enhancing shareholder value for both companies.”

LS plans to hold a second corporate briefing session later this month, during which it will provide details on the subscription process once finalized and announce additional shareholder return policies, including dividend and value-up strategies.