Swallowing the 'January Effect' and Amplifying Criticism of Physical Division... LG Energy Solution's 'Record-Breaking' IPO

Public Offering Funds Reach Up to 12.7 Trillion Won... Approaching Past Annual Offering Amounts
Absorbing Institutional and Individual Investment Demand, Korea Stock Market's 'January Effect' Also Disappears
Criticism of Physical Division Raised... Presidential Candidates' Interest UP

[Asia Economy Reporter Minwoo Lee] LG Energy Solution, which is set to break all-time records for initial public offerings (IPO), has officially begun its listing schedule. Even before the schedule was finalized, standby funds eager to invest in the public offering accumulated, leading to analyses that the typical January rally in the domestic stock market was wiped out. Meanwhile, presidential candidates have become aware of individual investors' dissatisfaction and have even voiced opinions regarding the physical division, placing the company at the center of various controversies.

According to industry sources on the 11th, LG Energy Solution will finalize its public offering price on the 14th after conducting demand forecasting among institutional investors by the 12th. The desired price range is between 257,000 and 300,000 KRW. If the offering price is set at the upper limit, the market capitalization will exceed 70 trillion KRW. This alone corresponds to the third-largest market cap on the KOSPI as of the previous day. Considering potential stock price increases after listing, it is expected that LG Energy Solution could surpass SK Hynix, which has held the second-largest market cap in the domestic stock market for years, to claim the second spot.

◆The Vanished January Effect=As a record-breaking "big fish," its impact on the stock market was significant. The public offering funds for LG Energy Solution could reach up to 12.75 trillion KRW, the largest ever in the domestic stock market. Considering that the average annual public offering amount on the KOSPI, excluding last year, was around 10 trillion KRW, LG Energy Solution alone is absorbing the equivalent of past annual public offering funds.

First, it had a major impact on the disappearance of the "January effect," where the domestic stock market typically rises at the beginning of the year. The KOSPI fell 2.08% from the start of the year to the previous day's closing price, dropping to the 2,920 level. Compared to the Taiwan Weighted Index, which fell 0.55% during the same period, the decline was four times greater. Although the Federal Reserve's tightening measures also influenced the market, the stock market faltered as investment demand from institutions and individual investors was absorbed by LG Energy Solution's investment demand.

The recent consecutive sell-offs by institutional investors are also interpreted as portfolio adjustments to invest in LG Energy Solution. Institutional investors consistently sold for eight trading days starting December 29 last year. During this period, they sold a total of 6.6963 trillion KRW worth of shares. Compared to the 4.9868 trillion KRW sold during the same period last year, the selling volume increased by more than 1.7 trillion KRW.

◆Criticism of 'Physical Division' Reaches Politics=The issue of physical division has even spread to the political arena. As dissatisfaction among individual investors of LG Chem, whose stock price plunged due to LG Energy Solution's physical division, grew, political circles began paying attention to the physical division ahead of the presidential election. Lee Jae-myung, the Democratic Party presidential candidate, proposed banning simultaneous listings and granting stock purchase rights to the parent company's shareholders. Yoon Seok-youl, the People Power Party presidential candidate, also promised to guarantee rights by granting subscription rights to new shares to the parent company's shareholders.

Previously, LG Chem's stock price began to decline as LG Energy Solution's listing became more concrete. The perception that the premium of being the "leader in secondary batteries" had disappeared spread. The stock price, which reached an all-time high of 1,050,000 KRW on January 14 last year, plummeted 41.4% to 615,000 KRW on the last trading day of last year, December 30. As the stock price fell, short selling volumes, which profit from price drops, also surged. According to the Korea Exchange, LG Chem's short selling transaction amount reached 232.7 billion KRW on the 7th, a 23-fold increase compared to 10.6 billion KRW at the end of last year. It accounted for 39.2% of the total transaction amount. The short selling transaction amount on the previous day also reached 69.3 billion KRW.

Kwon Young-soo, Vice Chairman and CEO of LG Energy Solution

In response, CEO Kwon Young-soo made conciliatory remarks at a press conference the day before. He said, "Even after the listing, LG Chem remains a company holding 82% of LG Energy Solution's shares," adding, "Based on the upper limit of the public offering price, this corresponds to 60 trillion KRW, and LG Chem's current market capitalization in the 50 trillion KRW range is excessively undervalued and will soon return to its proper level."

However, this view has been criticized for not considering the holding company discount. Hwang Se-woon, senior researcher at the Korea Capital Market Institute, pointed out, "If the value of the subsidiary is fully reflected, it results in double counting of value, inflating the market capitalization," adding, "This explanation does not take into account the holding company discount."

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