Shares in LG Energy Solution Ltd. jumped 68% on their first day of trading, after the world’s No. 2 maker of electric-vehicle batteries raised about $10.6 billion in South Korea’s largest-ever initial public offering.
The offering by LG Energy, which supplies batteries to Tesla Inc., General Motors Co. and Hyundai Motor Co., capitalized on investor appetite for key suppliers in the EV industry as well as electric-car makers themselves.
The run-up in LG Energy’s stock Thursday pushed its market value toward $100 billion—defying broader gloom in global equities as the country’s Kospi Composite index shed 3.5% to close in bear-market territory.
Despite the broader market volatility, “There are good structural growth trends” supporting LG Energy’s business, said Yoojeong Oh, investment director for Asian equities at Abrdn. He said his firm participated in the IPO.
Mr. Oh said LG Energy’s long record as a leading battery producer was also an advantage, with its customer relationships and intellectual property serving as a barrier to entry for newcomers in the market for higher-end EV batteries.
The deal was heavily oversubscribed, with investor orders vastly exceeding the stock on offer. In total, investors sought to buy the equivalent of about $12 trillion in stock, filings showed. It was the largest global IPO since U.S. electric-vehicle making startup Rivian Automotive Inc’s blockbuster listing in November, which raised a total of $13.8 billion including a so-called green-shoe option, according to Dealogic.
The company is the industry’s biggest player after China’s Contemporary Amperex Technology Co., or CATL. While CATL largely caters to its home market, its South Korean counterpart has made its dominance in Europe and aggressive U.S. investments a pitch to investors.
LG Energy is likely to benefit from its expansion into Western markets amid geopolitical tensions, said Neil Beveridge, a senior energy analyst at Sanford C. Bernstein.
“Given the decoupling between China and the West, it seems likely we’re going to see the growth in non-Chinese battery makers,” he said. “I think the U.S. market in particular is going to be very important for its growth over the next three to four years.”
On Thursday in Seoul, LG Energy shares gained 68% from their IPO offer price to close at 505,000 South Korean won a share, or the equivalent of about $422.
That lifted the company’s market capitalization to about 118.2 trillion won, or the equivalent of about $98.7 billion, making it South Korea’s second most valuable listed company, after Samsung Electronics Co.
CATL, which had a market value of some $215 billion as of Wednesday’s close, had about 29% of the global EV battery market by units sold last year, followed by LG Energy’s 22%, according to SNE Research.
The share sale totaled about 12.75 trillion won, or the equivalent of about $10.6 billion, including some shares sold by parent company LG Chem Ltd. LG Energy will use some of the proceeds it receives to help fund a $5 billion investment program in the U.S., aimed at ramping up production capacity at factories in Michigan and at a joint venture with GM. It will also use some of the money raised to expand in Europe and China, it said in a filing.
LG Energy had planned to go public last year, but postponed the deal after GM recalled about 142,000 Chevrolet Bolt electric vehicles that used the South Korean company’s batteries due to the risk of battery fires. GM said it would recover nearly all of the $2 billion cost of the recall from LG Energy. LG Energy was also involved in a separate recall by Hyundai Motor last year.
Those episodes were temporary setbacks but another big recall could damage its brand, said Mr. Beveridge at Bernstein.
Write to Frances Yoon at [email protected]
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