LG Energy Solution debuts after $13 trillion frenzy in Korea's biggest IPO(2022-01-27)

박재훈투영인

created At: 2/4/2025

Sell

This analysis includes a sell recommendation. Please carefully review all mentioned risk before proceeding.

373220

LG Energy Solution

226490

Samsung KODEX KOSPI ETF

Fact

LGES completed Korea's biggest IPO, valued at 12.8 trillion won ($10.7 billion) IPO attracted $13 trillion in total bids Became Korea's third most valuable company after Samsung and SK hynix Controls over 20% of global EV battery market Share price set at 300,000 won 4.4 million retail investors bid 114 trillion won Company has 260 trillion won battery order backlog LGES market value is about $60 billion vs CATL's $208 billion

Opinion

The massive oversubscription of LGES's IPO raises serious concerns about market euphoria. The unprecedented retail investor participation suggests potential bubble formation in the EV sector, while the company's valuation appears stretched given intensifying competition from Chinese manufacturers and automakers' in-house battery development efforts. The huge gap between LGES and CATL's market capitalization also suggests potential market share vulnerability in the face of aggressive Chinese expansion.

Core Sell Point

Despite strong IPO demand and impressive order backlog, LGES faces significant risks from intensifying competition and potential market overvaluation, which could lead to substantial share price pressure as the EV battery market matures and competition intensifies.

Shares of battery maker LG Energy Solution (LGES) debuted Thursday after South Korea's biggest-ever initial public offering (IPO) attracted bids worth $13 trillion, underscoring upbeat prospects for the electric vehicle industry.

LGES priced its 12.8 trillion won ($10.7 billion) IPO at the top of the range, becoming Korea's third most-valuable company after Samsung Electronics and SK hynix with a nearly $60 billion market valuation.

Spun out of LG Chem, the company commands more than 20% of the global EV battery market and supplies Tesla, General Motors and Volkswagen among others.

It sold its shares in the offering at 300,000 won each.

Its trading debut will set the tone for upcoming IPOs in South Korea as retail investors ― known as "ants" ― have flocked to the stock market with liquidity aided by the government's stimulus policy during the COVID-19 pandemic.

"It is quite tricky to predict LGES' first-day trading performance, mainly because the market's recent volatility caused by various factors such as investor concerns over the Federal Reserve and how quickly it will move," said Park Jung-hoon, fund manager at HDC Asset Management in Seoul.

More than 4.4 million retail investors bid a record 114 trillion won ($95 billion) to subscribe to shares in the IPO, Asia's largest equity fund raising since Alibaba raised $12.9 billion in its Hong Kong secondary listing in 2019.

Nearly 2,000 foreign and domestic institutional investors lodged bids worth about $12.8 trillion.

More than 20 companies went public on South Korea's main board last year, raising about 17 trillion won, nearly double the previous record of 8.8 trillion won raised in 2010, according to the bourse operator, the Korea Exchange.

While LGES' market value is dwarfed by its bigger Chinese rival Contemporary Amperex Technology's (CATL) $208 billion market capitalization, LG Chief Executive Kwon Young-soo has pointed to a 260 trillion won battery order backlog to highlight the company's growth potential.

Analysts caution LGES will still likely face growing competition as Chinese peers expand into the global market and more automakers seek to develop their own EV battery technologies. (Reuters)

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