EcoPro Materials IPO review may gain speed for potential debut this year

[Courtesy of EcoPro Materials]

The pace of the initial public offering (IPO) review for EcoPro Materials Co., a subsidiary of South Korea’s leading supplier of electric vehicle battery materials EcoPro Group, is expected to pick up speed next month.

According to sources from the financial investment industry on Wednesday, with the anticipated finalization of the listing review in the upcoming month, EcoPro Materials, projected to hold a market capitalization of up to 5 trillion won ($3.78 billion), is likely to join the main Kospi market within this year.

This development arises as the legal concerns surrounding the group founder’s fate have been resolved with his imprisonment fixed on unfair trade charges, dispelling uncertainties related to the issue. Furthermore, the shares of EcoPro Group have recently adjusted from their previous highs, signaling a departure from the prior overheated controversy.

EcoPro Materials submitted a preliminary listing review application to the Korea Exchange on April 27, but the 45-day review deadline was already passed. During this period, the exchange was unable to expedite its review due to the heated discussions about the rapid escalation of stock prices of listed EcoPro Group affiliates and the uncertainty surrounding the Supreme Court’s decision involving former Chairman Lee Dong-chae.

However, with the court’s ruling on August 18, sentencing Lee for his violations of laws related to the capital market and financial investment business, uncertainties regarding ownership have been cleared for the time being.

The former chairman, who holds the apex of the group’s governance, has stepped back from the front line of management.

Going forward, the key for EcoPro Materials to meet the qualitative review requirements is whether the company has established proper internal control systems to enhance management transparency and prevent unfair trade practices.

“We have strengthened our internal control systems centered on the board of directors to enhance management transparency and compliance, and instructed executives to refrain from selling company shares as much as possible,” an official from the company said.

An investment banking (IB) industry insider said that there seems to be no reason to further delay the listing of EcoPro Materials. “The issue of moral hazard by the owner is a negative factor for the listing, but the company can meet the relevant qualitative requirements if it has the right systems in place to prevent a recurrence.”

The controversy surrounding the rapid surge and overheating of the share prices of listed affiliates, which has weighed more heavily on EcoPro Materials’ listing review than the risks associated with the owner, appears to have somewhat subsided.

Shares of EcoPro Co. rose to 1.53 million won ($1,158) intraday on July 26, but has recently been trading in the range of 1.2 million won. EcoPro BM Co. also peaked at 584,000 won and dropped to 330,000 won.

The listing of EcoPro Materials is being supported in the industry as there are growing calls to increase self-sufficiency in secondary battery materials against Chinese players.

The company’s high-nickel precursor is considered a key material for secondary batteries. While domestic cathode material companies are entering the precursor market with the aim of expanding self-sufficiency in high-nickel precursors, most of the precursor manufacturing technology and management rights of joint ventures are owned by Chinese companies.

“The majority of joint ventures in Korea are led by China, and only EcoPro Materials has the technological know-how and mass production experience for high-nickel precursors,” said an official from EcoPro Group. “We will more than quadruple our production capacity centered on high-nickel precursors to expand domestic precursor self-sufficiency.”

The group said that EcoPro Materials will use the IPO proceeds to expand its production capacity to reduce the domestic precursor industry’s dependence on China and help it take root as a core business.

When EcoPro Materials is listed on the stock market later this year, it is expected to become the third trillion-dollar company to go public this year, following Doosan Robotics Inc. and Seoul Guarantee Insurance Co.