LG Chem Running Out of Battery, Shareholders Growing Anxious

Shareholder Backlash Over Spin-off and IPO Plans... Securities Industry Views as Positive Development

[Asia Economy Reporter Kum Bo-ryeong] As LG Chem pursues the spin-off and initial public offering (IPO) of its battery division, shareholders' dissatisfaction is mounting. However, the securities industry is paying attention as some opinions suggest that this spin-off will play a positive role in business growth.

According to the Korea Exchange on the 17th, LG Chem's stock price closed at 687,000 KRW the previous day, down 5.37% (39,000 KRW) from the previous session. The stock price, which had shown a stable trend, dropped sharply during the day following news of the battery division spin-off. As of 10:20 a.m. on the same day, it recorded 667,000 KRW, down 2.91% (20,000 KRW) from the previous close.

Shareholders voiced strong dissatisfaction toward LG Chem. In particular, the fact that the spin-off is a physical division rather than a demerger by incorporation was a major grievance for shareholders. In a demerger by incorporation, existing LG Chem shareholders can receive shares in the new company proportionate to their holdings, but in a physical division, this is not possible. If investors want to invest in LG Chem's battery division, they must reinvest in the newly created company through the IPO.

Individual investors even posted on the Blue House petition board asking to prevent damage from the battery division spin-off. One individual, who identified themselves as an LG Chem shareholder, stated, "News of approval for the physical division came out without any reflection of shareholders' opinions," adding, "Most invested thinking it was a battery-related stock, but after the spin-off, it becomes an investment in a chemical-related stock entirely different from the original reason, and any losses incurred cannot be compensated anywhere."

Yoon Mo (38), an LG Chem shareholder and office worker, said, "'BBIG (Bio, Battery, Internet, Game)' was considered a valuable investment, so I started investing in LG Chem, the leading battery stock, but if the battery division is spun off, it would be like a 'steamed bun without red bean paste,'" adding, "Seeing the stock price drop these past couple of days only makes me sigh."

LG Chem's stock price rose significantly this year as it entered the early stage of the battery investment recovery cycle. One year ago, on September 17 last year, the stock price was 327,500 KRW. It rose to 419,500 KRW on February 17 this year but fell to 230,000 KRW on March 19 due to the impact of the COVID-19 pandemic. Since then, with growing attention on the battery division, it gradually increased to 357,000 KRW on May 19, 440,000 KRW on June 10, 635,000 KRW on the 3rd of last month, and 768,000 KRW on the 3rd of this month.

Institutional investors bet against the stock price by short-selling amid the battery spin-off. They sold 42 billion KRW worth of LG Chem shares the previous day.

However, the securities industry views this more as a positive than a negative. This is because the battery division spin-off is seen as beneficial for business growth. Baek Young-chan, a researcher at KB Securities, said, "LG Chem's battery division spin-off is positive for the stock price in two ways: first, the battery business can receive a proper valuation compared to competitors, and second, after the physical division, it is possible to secure investment funds through liquidity events such as the battery business's listing."

Han Sang-won, a researcher at Daishin Securities, also said, "The impact on the stock price can only be judged after the board of directors confirms specific schedules, but at this point, it is more likely to act as good news rather than bad news," adding, "This could be an opportunity for the battery business's value to be re-evaluated. For example, China's CATL, which has smaller production capacity than LG Chem, has a market capitalization of 78 trillion KRW, while LG Chem's is only 48 trillion KRW."

In the case of a physical division, the battery division will be reflected as a 100% subsidiary of LG Chem in consolidated financial statements. Even if an IPO is conducted after the spin-off, there is no possibility of losing control, so the battery division will continue to be consolidated. The new company is tentatively named 'LG Energy Solution.'

This content was produced with the assistance of AI translation services.