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LG Chem’s lithium-sulfur battery is on display at the LG Chem booth at InterBattery 2020. 2020.10.21 / News 1 Reporter Kim Dong-gyu © News 1As the spin-off of the battery business promoted by LG Chem gained the consent of many shareholders, the obstacles that remained until the spin-off were removed. But more importantly, it is noted that after the spin-off, he has to solve a number of tasks in the future and establish himself as a ‘No.
As the agenda for the spin-off was approved at the shareholders’ meeting on the 30th, on December 1, ‘LG Energy Solutions (provisional name)’, a new corporation dedicated to the battery business, will be officially launched. LG Chem will own 100% of the new corporation.
As the national pension, the second largest shareholder with a 10.28% stake, opposed the spin-off, there was a sense of crisis that it would be rejected once, but the reversal was successful. LG Chem plans to raise funds to expand on a large scale in the future.
The first task is expected to be stable funding. Currently, LG Chem plans to expand the facility by investing 3 trillion won each year to respond to the rapidly increasing battery orders. Funding methods include issuing new shares to automakers or IPOs by the end of next year. If you decide to go public, there are several options, such as listing on the national stock market or the US NASDAQ. If listing on the US market, LG Chem, which has the largest share of the global battery market, can expect a significant increase in the share price, in line with the level of the world industry. Currently, the market capitalization of CATL in China, the second largest market share, is 97.5 trillion won on the previous day (30 days), while the market capitalization of LG Chem, which is No. 1 , is only 43 trillion won, including all businesses like batteries and petrochemicals. You’re reviewing all the options, including this one. At a general shareholders meeting the day before, CFO Gao Cha, who asked this question, said: “I am considering how to best grow the company among various strategies, such as initial public offering and strategic investor attraction (SI). “. When the administration is formed, we will discuss it seriously. “
It is also a task to maintain LG Chem’s share price after the spin-off. In fact, the biggest concern among public opinion opposing the spin-off was concern about a drop in share prices. Contrary to expectations, the second largest shareholder, the National Pension Service, said its opposition to the spin-off was a concern about “hurting shareholder value.” If the share price falls significantly lower than before, the spin-off will be unwarranted.
Even if it’s not just for the rationale, if the stock price falls, it’s a loss from a financial point of view. Companies prefer to raise funds by issuing shares and selling them to consumers rather than loans or bonds when financing, in this case, the higher the price of the shares, the higher the price, which is advantageous for raising capital . For example, if the LG Chem share price is 1 million won and 100 shares are issued, it costs 100 million won, but when it is 500,000 won, even the same shares cost 50 million won.
However, in the stock market on this day, LG Chem’s stock price fell 40,000 won (6.14%) from the previous day, significantly falling from the entire KOSPI index (-2.56%). This is a 22.2% drop from August 27 (785,000 won), which was the highest before the spin-off was revealed. If this situation persists, you may lose energy. However, LG Chem believes that the divestiture announcement may have had some effect on the share price decline, but the tightening of the entire Korean stock market has also been affected.
The ultimate challenge is to survive in the increasingly competitive global battery market and ultimately remain a leader. With the rapid growth of the electric vehicle market, automakers like Tesla are securing their own battery mass production capabilities, and CATL, a strong competitor, is making large-scale investments through cooperation with battery manufacturers. cars supported by the Chinese government.
LG Chem plans to respond through “super breach” management. At the general meeting of shareholders that day, LG Chem announced that it will differentiate battery performance and strengthen cost competitiveness by further improving battery-related technologies and dramatically improving mass production technologies. The company also announced plans to expand its production capacity from 120 gigawatts (GWh) this year to more than 260 GWh by 2023.
Additionally, safety-related concerns, such as the recent nose and fire, are also issues that need to be resolved. Vice President Shin said, “This decision is an unavoidable decision for the growth of the company, so we ask for your understanding and support. We promise to further expand communication with shareholders.”
(Seoul = News 1)
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