EcoPro Materials faces setback in IPO plan

The Korea Times

The Korea Times

Finance

Mon, October 2, 2023 | 00:06

Markets

EcoPro Materials faces setback in IPO plan

Posted : 2023-03-20 16:47

Updated : 2023-03-21 09:36

Seoul Southern District Prosecutors' Office in Seocho District in Seoul / Yonhap

By Anna J. Park

Battery materials business group EcoPro is facing a major setback to its plan to list its key subsidiary EcoPro Materials within this year, as prosecutors investigate the company over allegations of insider trading by some of its former and incumbent executives and staff employees.

According to the financial authorities, a joint investigation team on financial crimes established at the Seoul Southern District Prosecutors' Office as well as special judicial police officers from the Financial Services Commission (FSC) are currently investigating the company. They also searched the headquarters of EcoPro, located in Cheongju, North Gyeongsang Province, last Thursday and Friday as part of the investigation.

The Korea Exchange (KRX), the state-led market bourse operator, has apparently noticed abnormalities in EcoPro's stock trading, and reported the case to the FSC's special judicial police. It is the second time that the prosecution and financial authorities launched an investigation on allegations of insider trading that some members of the company took profits by trading stocks based on undisclosed information in 2020 and 2021.

EcoPro said that it takes the issue very seriously, vowing to strengthen internal controls over insider trading and any other unfair trading practices.

"Following the past investigation, the company has been aiming to raise employees' understanding on the capital market rules since early 2022. The firm has also strengthened its compliance structures, such as its internal monitoring control system, to prevent unfair stock trading utilizing undisclosed information," EcoPro's official statement on Sunday reads.

The secondary battery materials manufacturer stressed that those who are being investigated will be completely excluded from the boards of all of its subsidiaries. The company also vowed to completely overhaul its board composition and operation.

"The company is taking the issue very seriously, and will continue to take every possible attempt for mutual maturity for both the firm and its staff," the statement added.

With the repeated investigation focusing on the headquarters of EcoPro, it becomes questionable whether the battery group's subsidiary EcoPro Materials could go public later this year as planned. EcoPro holds a 52.78 percent stake of EcoPro Materials, which specializes in manufacturing cathode material precursors, a core material for lithium secondary cells. EcoPro Materials' corporate valuation is assessed to be at between 2 trillion won to 5 trillion won ($1.5 billion to $3.8 billion), and it's been originally expected the company would register for a preliminary assessment for the IPO to the KRX within this month.

Market watchers view that the additional prosecutorial investigation, taking place just a year after last year's investigation, is likely delay the IPO schedule of the subsidiary.

"It's not likely that the company would launch its IPO plan, until the final result of the investigation comes out and removes any judicial uncertainly completely," a market watcher pointed out.

Meanwhile, the stock price of EcoPro ended at 403,000 won at Monday's closing, a 0.88 percent jump from the previous session. This year alone, the stock price nearly quadrupled from 103,000 won at the last trading session of last year. Currently, the company is the tech-heavy Kosdaq's second-largest market cap company with its valuation reaching over 10.4 trillion won. EcoPro BM, a spun-off company of EcoPro, is topping the Kosdaq market chart in terms of market cap, with 19.9 trillion won.

annajpark@koreatimes.co.kr