LG Energy Solution’s IPO likely to be priced at $11 bln top end

South Korean battery maker LG Energy Solution (LGES) will likely price its IPO at the top of its indicative range at around $11 billion.

That pricing would make LGES, a wholly-owned unit of LG Chem Ltd (051910.KS) that supplies to firms including Tesla (TSLA.O), General Motors (GM.N) and Hyundai Motor (005380.KS), the biggest listing ever in South Korea.

LGES said last week it expected to offer 34 million new shares in an indicative range of 257,000 to 300,000 won per share, which would raise around 12.8 trillion won ($10.9 billion) at the top end when the IPO is scheduled to be priced on Jan. 14.

“LGES’ IPO is drawing the hottest demand from institutional investors compared to any other South Korean IPOs this year,” said an investment banker with direct knowledge.

With just 14.5% of shares being offered to institutional and retail investors, prospective buyers would need to bid big to get an allocation, the banker added.

An official at a brokerage firm involved in the deal also said the feedback so far from, mainly domestic, institutional investors indicated the IPO would easily come in at the top end.

Both sources declined to be identified as they were not authorised to speak to the media.

A successful debut by LGES, which is scheduled to list on South Korea’s main stock exchange KOSPI (.KS11) on Jan. 27, would kick off what is expected to be another strong year in the country’s IPO market after a record result this year.

More than 20 companies have gone public on KOSPI this year, raising about 17 trillion won, easily beating the 8.8 trillion won raised in 2010, the previous biggest year on record, according to the Korea Exchange.

At top of the price range, LGES would have a market value of 70.2 trillion won ($59.39 billion). That would make it South Korea’s third most valuable company after Samsung Electronics Co Ltd. (005930.KS) and SK Hynix Inc (000660.KS), with valuations of 460 trillion won ($389.15 billion) and 89 billion won ($75.23 million), respectively.

Parent LG Chem’s ownership in the company will reduce to 81.8% after the offering.

ELECTRIC VEHICLE DEMAND

Analysts said the booming demand for lithium-ion batteries for electric vehicles (EVs), combined with LGES’ rare position as a top-tier battery maker with established customers, makes it particularly attractive to investors.

Global EV sales, estimated at 2.5 million vehicles in 2020, are forecast to grow more than 12-fold to 31.1 million by 2030 and account for nearly a third of new vehicle sales, according to consulting firm Deloitte.

“It’s not like you’re betting on an emerging battery manufacturer with limited customers and market presence,” said Cho Hyun-ryul, an analyst with brokerage Samsung Securities.

Some analysts, however, warn that LGES’ profitability and stock performance could be vulnerable to any future EV industry hiccups like Hyundai Motor’s $900 million recall, involving the Kona EV, and GM’s $2 billion Bolt EV recall.