LG Energy Solution’s IPO plan remains elusive after GM recall settlement

South Korea’s top battery maker LG Energy Solution Ltd. is about to resume its initial share sale plan shelved for months due to the uncertainty over the recall costs for General Motors’ electric cars, but the outlook for an IPO by year-end remains elusive.

The company said on Tuesday it is resuming its suspended IPO process now that LG and GM have concluded talks on how to proceed with the recall of GM EVs.

In early August, LG Energy Solution applied for a preliminary review of its plan to list its shares on the Korea Exchange with an aim to go public by the end of the third quarter.

But the plan went awry after GM said in mid-August that it is recalling the Chevy Bolt EVs equipped with batteries supplied by LG due to fire risks after some of the vehicles caught fires.

LG Chem Ltd., the parent of EV battery maker LG Energy Solution, and LG Electronics Inc., which assembles cells manufactured by LG Energy into battery modules, said at the time they would fully cooperate with GM to look into the cause of the EV fires.

On Tuesday, GM said LG agreed to reimburse it for nearly all of the $2 billion costs of recalling Chevrolet Bolt electric models. Separately, LG Group said it would shoulder 1.4 trillion won ($1.2 billion) of costs associated with the recall.

LG Chem and LG Electronics have said they booked most of the 1.4 trillion won in costs in the July-September quarter after taking similar loss-provisioning measures in the previous quarter.

2022 IPO MORE LIKELY

Industry watchers say LG Energy Solution may not be able to list its shares on the Korean bourse by the end of this year as the company is running out of time to prepare for listing.

To resume its IPO process, the company will now need to submit its finalized third-quarter financial statements, available in late November, to the authorities and potential investors.

“LG Energy will be able to go public later this year at the earliest only if it can complete all its IPO process by the end of next month,” said an investment banking industry official.

Analysts said some time early next year could be the prime time for an IPO rather than rushing to finish the procedure before the end of this year, given the weak stock market now.

“Institutions will soon start window dressing to make their annual return on investment look good. They won’t hurriedly buy into LG Energy’s shares during the IPO if the company pushes ahead with it near the year-end,” said a local brokerage official.

LG Energy’s corporate value is estimated at between 70 trillion won and 100 trillion won ($59 billion-$84 billion), and the company will be able to raise around 10 trillion won in capital through the IPO, which would be the largest-ever listing in Korea, according to industry officials.

With the IPO proceeds, LG plans to expand its production capacity and increase research and development. In March of this year, LG Energy unveiled a plan to invest more than 5 trillion won by 2025 to ramp up its US battery business, including building a new plant.

Additionally, LG Energy and GM said in April that they would spend 2.7 trillion won to build their second US EV battery plant in Tennessee through their joint venture, Ultium Cells LLC, in order to double the JV's EV battery output in the US.

Write to Jin-Seong Kim at Jskim1028@hankyung.com
In-Soo Nam edited this article.