LG’s energy subsidiary enjoys stellar debut
The new battery maker became the country’s second most valuable company by market value, attracting bids worth US$ 10.8 billion. This marks the comeback of South Korean conglomerates, in this case helped by the competition with China’s CATL.
Seoul (AsiaNews) – LG Energy Solution (LGES), part of South Korea’s LG Group conglomerate, has become the second largest company in South Korea by market value, debuting last Thursday with a record breaking initial public offering (IPO) on the Korea exchange.
LGES attracted bids worth US$ 10.8 billion, twice as much as the previous IPO record holder, namely Samsung’s insurance subsidiary.
Initially sold for 300,000 won each, shares almost doubled in value on the first day, closing at +68.3 per cent. The company's value reached 118 trillion won (about US$ 98 billion), second only to Samsung Electronics.
For LG, last week's IPO was a good sign. In April, it announced it would stop making smartphones after several years of losses, shifting to other markets like electric car parts.
LGES is the LG subsidiary dedicated to the production of batteries for electric vehicles.
According to an estimate by SNE Research, the share of the global market owned by the South Korean company is around 23.8 per cent, second only to that of China’s CATL (31.2 per cent).
There are at least two reasons for LGES’s successful IPO with institutional as well as individual investors.
The first is the growing demand for batteries, linked to government and corporate efforts to achieve climate neutrality.
According to some estimates, electric car production is to take off in the coming years, reaching at least one third of all new car sales by 2030.
The second is the competitive advantage the South Korean company has over its Chinese rival in the current political climate, characterised by US-China confrontation.
CATL, despite its larger size and existing partnerships with several car manufacturers (like BMW, Toyota and Honda), generates about 80 per cent of its revenues in China and cannot easily boost its operations abroad in the current climate of distrust.
Conversely, LGES is rapidly building a global network of joint ventures that allows the company to position itself strategically to take advantage of the growth in electric car use.
Over the past year it has reached an agreement to make batteries for Stellantis and announced investments in two new plants together with General Motors, as well as a third one already under construction.
The rise of the South Korean company as a global player in the green revolution also reveals a lot about South Korean President Moon Jae-in.
Leader of the Democratic Party of Korea (DPK), Moon was elected as South Korea’s head of state five years ago on a promise to fight the excessive power of the large industrial conglomerates, like LG, that have dominated the South Korean economy.
Yet the energy transition and the development of green technologies, essential to maintain the country's economic growth, cannot be done without the knowhow and capital of these conglomerates.
Even after the IPO, 82 per cent of LGES will be controlled by LG Chem, one of LG’s largest subsidiaries.
In South Korea, the debate over economic democracy and technological innovation is thus bound to continue.
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