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LGES pushes ahead with its planned IPO Battery maker applies for preliminary approval amid various concerns

Translated by Kim So-in 공개 2021-06-11 07:51:20

이 기사는 2021년 06월 11일 07:36 더벨 유료페이지에 표출된 기사입니다.

LG Energy Solution (LGES), the electric vehicle (EV) battery manufacturing subsidiary of LG Chem, will push ahead with its planned initial public offering (IPO) despite various risks.

The battery maker said in a regulatory filing Tuesday that it applied for preliminary approval to list its shares on the country's main stock market.

LGES has planned its IPO since it was spilt off from LG Chem, aiming to raise a huge amount of funds based on its heightened valuation thanks to the booming EV battery industry.

However, some negative factors have emerged including a trade secrets dispute with SK Innovation in the United States, which has now been solved, and a voluntary recall of its lithium-ion batteries used in energy storage systems.

Global automakers including Volkswagen, Tesla and Ford, looking to internalize battery production are considered another risk which may put pressure on the company’s valuation.

Last year when the company started its IPO process, market insiders estimated LGES’ valuation to be as high as 100 trillion won ($89.7 billion), which will make the company the second largest company in the country by market capitalization after Samsung Electronics. Despite concerns that LGES may not be valued properly due to negative issues earlier this year, the battery maker has decided to go forward with its plan, expressing its confidence.

LGES makes the battery safety the top priority. "We will continue efforts to develop the next-generation battery technology and make the best and safest batteries for the global supply chain," Shin Hak-cheol, CEO of LG Chem said in the annual meeting of shareholders held earlier this year

Automakers’ internalization of EV battery can also be seen as positive. “Automakers’ announcement of internalization itself may not be a positive factor to LGES, but it won’t be easy for automakers to catch up with expertise and experience that battery makers have,” said an official at a state-run bank.

“Internalization could mean that automakers produce their own batteries, but it can also be interpreted as saying that automakers will strengthen relationships with battery makers and make them solid suppliers in their value chains.”

LGES is also in need of funds. LGES said in April it will spend a total of 2.7 trillion won to build its second battery factory in the U.S. with American automaker General Motors. It also plans to invest more than 5 trillion won to expand U.S. battery production capacity by 2025.

LGES has cash and cash equivalents worth 2.4 trillion won at the end of March on a consolidated basis. Of the total, 1.2 trillion won is classified as bank deposits and cash holdings, but the remaining 1.2 trillion won is a deposit with a limited purpose, which is relatively less liquid. Even if the entire 2.4 trillion won can be used immediately, an additional fundraising is inevitable to finance the company’s investment plan. (Reporting by Ki-soon Park)
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