HD Hyundai, SK, CJ, Lotte face IPO dilemma under Korea's new subsidiary listing rules

Visitors examine HD Hyundai Robotics' artificial intelligence (AI)-powered robotics welding system during the inaugural Industrial AI Expo at Coex Magok in Seoul, Sept. 3, 2025. Newsis

The government’s new guidelines, which effectively bar the separate listing of subsidiaries spun off from listed parent companies that can erode shareholder value, have cast uncertainty over the initial public offering (IPO) plans of several high-profile Korean firms, according to industry experts, Tuesday.

Among those forced to rethink their listing strategies are HD Hyundai Robotics, CJ Olive Young, Lotte Biologics and SK ecoplant, all of which have been regarded as strong IPO candidates.

At the heart of the new regulations, unveiled Monday by the Financial Services Commission and the Korea Exchange, is a requirement that listed companies secure shareholder approval before separately listing subsidiaries created by spinning off part of their business while retaining control. The change puts minority shareholder protection at the center of the process.

Boards will also be expected to present concrete measures to preserve shareholder value, such as raising cash dividends, canceling treasury shares or strengthening the parent company’s earnings power through new investments.

HD Hyundai Robotics is widely viewed as the first major test of the new rules. The company was carved out of HD Hyundai in 2020 and earlier this year appointed its lead underwriters for its planned IPO. Since then, however, preparations have largely stalled.

The company has a compelling case for going public, given the rapid expansion of the robotics industry and its growing capital needs. But under the new framework, demonstrating the business rationale for an IPO will no longer be sufficient. It must also persuade shareholders that the listing will not come at their expense and outline credible measures to safeguard their interests.

“The shareholder approval process could become contentious, particularly if activist investors decide to get involved,” said Lee Jeong-hwan, a professor of economics and finance at Hanyang University. “The key challenge for firms will be convincing investors that an IPO will not dilute the value of their holdings or undermine future returns.”

Yang Jun-seok, an economics professor at the Catholic University of Korea, also said the new guidelines have made the process considerably more complicated for companies, adding preparing for an IPO will inevitably take longer.

He said HD Hyundai Robotics is likely to become a bellwether for how the new framework is applied. The outcome will hinge not only on the shareholder protection measures the company proposes but also on how rigorously regulators scrutinize them.

Yang also questioned whether the independent special committees required under the new rules would function as intended. Under the framework, parent company boards are expected to establish independent committees to review and approve key decisions throughout the listing process regarding their fiduciary duties to shareholders.

“The real test will be whether these committees can allow an objective forum where companies and shareholders can engage in meaningful dialogue or simply rubber-stamp management’s decisions,” Yang said. “The first few IPO cases will set the template for those that follow.”

Accordingly, the implications extend well beyond HD Hyundai Robotics.

Companies considering subsidiary IPOs are already reassessing both their timelines and broader listing strategies, as the level of regulatory scrutiny varies depending on factors such as how the subsidiary was created, its relationship with the listed parent and the extent of its operational independence.

That is prompting firms to weigh a range of options — pressing ahead with IPOs under the stricter framework, postponing listings or pursuing alternative measures.

For CJ Olive Young, market attention is increasingly shifting toward a merger with its parent, CJ Group, as a possible alternative to an IPO.

At SK ecoplant, long regarded as one of SK Inc.’s most valuable unlisted subsidiaries, the tougher rules could further weaken the case for going public. SK has recently moved to buy back part of the stake held by financial investors, signaling a growing preference for alternatives to an IPO.

Lotte Biologics also finds itself navigating a more complicated landscape. While continuing to invest heavily in its Songdo manufacturing facility, the company must now weigh its growth ambitions against a regulatory environment that has become far less accommodating to subsidiary listings.

Lee, however, does not believe the tougher rules will derail subsidiary IPOs altogether.

“Many of these businesses were spun off because they operate in fast-growing sectors that require significant investment. That fundamental need for capital hasn’t changed. IPOs may be delayed, but companies are still likely to pursue them in one form or another. The difference is that shareholder approval has now become the critical hurdle.”