Korean Business World's Expansion Formula Under Scrutiny

Spinning off core business divisions for new listings has been a popular strategy among Korean conglomerates for external expansion. A notable example is LG Energy Solution, which, after being split from LG Chem and listed in January 2022, raised 12.75 trillion won. However, this approach has not been without its drawbacks, as seen in the significant drop in LG Chem's stock price post-listing.

Government Signals Tighter Regulations

With the new government in office, there's a growing emphasis on tightening regulations around "split listings." President Lee Jae-myung's criticism of this practice has led to a cautious stance among conglomerates, with some even considering withdrawing IPO plans. This shift is also drawing attention from the increasing number of individual investors in the market.

Impact on Future IPO Plans

The potential for stricter regulations is causing companies like SK Group to reconsider their strategies. SK Enmove's halted IPO plans highlight the challenges businesses may face in securing growth through listings. The broader implications for the Korean market, known for its high proportion of multiple listings compared to other countries, are significant.

Looking Ahead

The government and ruling party are exploring measures to mitigate the effects of multiple listings, including prioritizing share allocations to existing shareholders. As the landscape evolves, the traditional path of external expansion through IPOs may undergo substantial changes, affecting not only current plans but also the strategic direction of Korean conglomerates.