Financial News: On the 13th, the Korea Corporate Governance Forum commented that the Initial Public Offering (IPO) of LG CNS is considered a duplicate listing and leads to a holding company discount.
Governance Forum stated, "The value of LG CNS was originally included in the holding company, LG Corp." and argued that whether the issue of duplicate listing falls under the Financial Services Commission's guideline of 'IPO after 5 years of physical division' is not important.
They further noted that "most of LG Corp.'s major subsidiaries like LG Electronics, LG Chem, LG Household & Health Care, LG Uplus, and HS Ad are also duplicate listings. LG CNS is the only significant unlisted subsidiary of LG Corp. except for relatively small subsidiaries like D&O, LG Academy, and LG Sports."
The Forum predicted that if LG CNS goes public, the value of LG Corp.'s stock will decline. They explained, "The easiest way to own the business of LG CNS was to buy LG Corp. stock, but after the listing, investors can directly invest in LG CNS, so there's no reason to buy LG Corp. stock." Currently, LG Corp. holds about 1.5 trillion won in net cash, which provides ample financial capacity.
The Forum also criticized the IPO for being unnecessary except for the second-largest shareholder Private Equity's (PE) exit through old stock sales and on-market sales. They insisted that the LG CNS case should be an opportunity to strengthen regulations on holding company ownership ratios and discuss structural reforms such as delisting.
"This is why we need to amend the Commercial Act.
No matter how much the regulations are changed, such practices will continue.
For shareholders to make proper investment decisions, there is no solution other than guaranteeing shareholder interests through the amendment of the Commercial Act."