LG Energy Solution draws record demand in IPO subscription

Customers visit a sales office of Shinhan Investment in Seoul, Tuesday, to place bids for LG Energy Solution shares ahead of its initial public offering. Yonhap

Retail investors place W114 tril. to subscribe shares of battery giant

By Lee Min-hyung

A two-day public subscription for LG Energy Solution's retail investors ended Wednesday, making history among the nation's initial public offerings (IPO). According to securities industry sources, around 4.4 million retail investors submitted bids worth 114 trillion won ($95.59 billion) for the subscription of the firm's common shares.

The battery maker made headlines Tuesday by receiving a record-high 32.6 trillion won in bids from investors on the first day of subscription. The company is slated to go public on the benchmark KOSPI on Jan. 27.

LG Energy Solution offered 34 million shares via the IPO and set the stock price at 300,000 won per share. The LG affiliate's initial market capitalization will reach 70.2 trillion won after going public.

However, given the firm's presence in the global battery industry, analysts expected its stock value to continue a rally on a rosy outlook for the electric vehicle (EV) market here and abroad. Some market experts even said the firm's market capitalization will soar to as high as 120 trillion won for some years after the IPO.

According to data from market tracker SNE Research, LG Energy Solution came in second in the global EV battery industry with a market share of 20.5 percent during January and November last year. The market leader is China's CATL and LG Energy Solution seeks to take the title as the world's top battery maker by continuing to expand its manufacturing facilities in Europe and the United States. CATL is valued at 250 trillion won in market capitalization.

"Our target stock price for LG Energy Solution is 520,000 won per share, and the company will be worth around 122 trillion won by 2025," Eugene Investment & Securities analyst Hwang Sung-hyun said.

The firm's sales for 2022 are forecast to top 21.5 trillion won, with its operating profit set to reach 1.3 trillion this year, according to the analyst.

"Expectations for the firm's expansion of manufacturing facilities by 2025 will be rapidly reflected in its stock price," he said.

Despite the optimistic outlook for LG Energy Solution's post-IPO growth, the stock price of LG Chem extended losses on Wednesday. Back in 2020, LG Chem shared its plan to split off the battery business by launching the new subsidiary. LG Chem shares reached as high as 1 million won early last year, but it continued to lose luster, with the battery affiliate's IPO schedule drawing closer. LG Chem shares showed poor performance with a drop of more than 6 percent at one point on Wednesday afternoon from the previous trading day.

"The stock price of LG Chem widened its volatility ahead of the listing of LG Energy Solution, but we maintain our opinion recommending purchasing LG Chem shares due to a series of positive factors," Choi Go-un, an analyst at Korea Investment & Securities said.

"Starting from 2022, LG Chem's investment momentum from its advanced materials will pick up steam," the analyst said. "We need to focus on the firm's expansion into new growth areas."

LG Energy Solution will become the nation's third most valuable company in terms of its post-IPO market capitalization next week, surpassing that of Naver whose value is 54.5 trillion won as of Wednesday. The battery maker may also become the second-largest company if its stock value continues to rise over 100 trillion won. For now, SK hynix maintains that spot with a market capitalization of 92.4 trillion won.

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