EcoPro Materials IPO remains unclear amid lingering owner risk

EcoPro Materials' precursor materials manufacturing facility in Pohang, North Gyeongsang Province / Courtesy of EcoPro

By Lee Min-hyung

A timely listing of EcoPro Materials, a cathode material precursors producer, appears unlikely, as authorities have yet to grant approval for the firm's bid to go public amid lingering owner risks after its group chief was recently convicted of insider trading.

EcoPro Materials submitted a preliminary application to be listed on the benchmark KOSPI in April, but the screening process ― conducted by the Korea Exchange ― has since shown little sign of progress.

It typically takes 45 days for the exchange operator to finalize the procedure, but it has been delayed due to a disagreement over whether the company met an eligibility requirement for its largest shareholder. EcoPro Materials' largest shareholder is EcoPro which holds a 52.78-percent stake in the affiliate. Lee Dong-chae, founder and chairman of EcoPro, is the largest shareholder with a stake of 18.84 percent in the group.

Back then, the company's listing plan was clouded by the risk factor associated with Lee's court ruling. However, after the Supreme Court upheld a two-year prison sentence on Lee in mid-August, concerns rekindled over the eligibility of the major shareholder.

The Korea Exchange is looking closely into whether EcoPro is ensuring management transparency and tightening its internal control system even after the court ruling.

EcoPro is in need of additional capital for its equipment investment, as it plans to quadruple production capacity with a focus on high-nickel precursors by 2027. Top management at EcoPro is urging its executives to refrain from selling their own shares, as this may send a negative signal to the market ahead of its planned listing.

“Executives are advised not to sell their own shares at this very sensitive period, and if they have to do so, please discuss it with the company before taking action,” EcoPro CEO Song Ho-jun said in a recent e-mail sent to executives of EcoPro and its affiliates, including EcoPro BM and EcoPro HN.

Despite the owner risk, some argue that the firm's listing plan should be approved, as the company holds strong fundamentals to drive the nation's overall battery industry growth and helps local electric vehicle (EV) manufacturers reduce their overseas reliance on secondary battery materials. EcoPro Materials is considered the only Korean company that can mass-produce precursor materials for secondary batteries.

The global auto paradigm shift ― driven by EVs ― also adds to a more optimistic outlook on the firm's growth potential. Sales of EcoPro Materials are on the sharp rise each year. The firm's 2020 sales reached 216.7 billion won. Last year, the figure soared to more than 660 billion won.