South Korea to ban duplicate listings
South Korea is planning to ban listed companies from separately listing core or high-growth subsidiaries, curbing a practice often blamed for diluting shareholder value.
The country's president Lee Jae-myung promised further market reforms to address the “Korea discount” at a meeting with analysts, institutional investors and listed companies on Wednesday.
Lee Eog-won, chairman of the Financial Services Commission, told the same meeting that specific plans would be prepared to ban duplicate listing practices by conglomerates, Reuters reported.
Referred to as "duplicate listings" in South Korea, spinoffs of core or high-growth assets on stock exchanges are seen as hurting the interests of minority shareholders to the benefit of chaebols, the family-controlled conglomerates that dominate the economy and have historically cared little for shareholder value.
That is even though many investors apply a holding company discount to conglomerates and spinoffs of group companies can often boost the parents' valuations.
Spinoffs by chaebols have always been a major source of IPOs. The country's largest IPO, the W12.8trn (then US$10.7bn) listing of electric vehicle battery maker LG Energy Solution in 2022, was a spinoff from chemical giant LG Chem.
Banning such deals is expected to dry up supply.
“What is now clear is the ban is going to kill whatever options for the listed companies that are looking to list their subsidiaries in South Korea in order to protect shareholder value at the parent level,” said a South Korean banker.
“But will the regulators allow exemptions for subsidiaries that are looking to list outside of Korea such as Hyundai Motor India or LG Electronics India? We need more details on how the ban is going to work,” said the banker.
Riding on a booming Indian IPO market, Hyundai Motor in October 2024 listed Hyundai Motor India through a Rs279bn (then US$3.3bn) IPO, the country's largest ever. Following in its footsteps, LG Electronics in October last year listed LG Electronics India through a Rs116bn IPO.
For now, the ban has put the IPO plans of HD Hyundai Robotics, a unit of HD Hyundai, and semiconductor and AI-focused SK Ecoplant, a unit of SK Group, in limbo.
“We need to analyse the impact of the ban,” a person familiar with one of the transactions said.
Some conglomerates have already anticipated the ban and dropped earlier plans to list certain units.
In January, cable manufacturer LS Corp withdrew a plan to list its US unit Essex Solutions in a W500bn Korea Exchange IPO after drawing heavy criticism from shareholders that was echoed by president Lee himself.
Investors seemed to welcome the fresh market reform push with the Kospi 200 Index surging 5.7% on Wednesday. Shares in LS Corp jumped 7.2%, while HD Hyundai and SK Inc rose 2.6% and 3.7% respectively.
Shares in automotive parts manufacturer DN Automotive soared 11% across two sessions on Wednesday and Thursday as investors believe there is now a slim chance the company will revive the listing plan of DN Solutions.
DN Automotive planned to list the industrial machine tools unit last year through a W1.6trn KRX IPO but previously withdrew the plan because of market conditions.