As gov't signals move against duplicate listings, chaebols reconsider IPO strategies

President Lee Jae Myung’s administration, which has pledged to usher in a “Kospi 5000 era,” is putting the brakes on duplicate listings, prompting major conglomerates to rethink their initial public offering (IPO) strategies.

President Lee Jae Myung delivers a speech marking the 80th anniversary of Liberation Day during a ceremony held at the Sejong Center for Performing Arts in central Seoul on Aug. 15. [JOINT PRESS CORPS]

President Lee Jae Myung’s administration, which has pledged to usher in a “Kospi 5000 era,” is putting the brakes on duplicate listings, prompting major conglomerates to rethink their initial public offering (IPO) strategies. Some affiliates are taking a breather from IPO preparations, while others are ramping up efforts to win over shareholders.

Hanwha Energy recently halted IPO-related work, including due diligence by its underwriter, according to industry sources on Thursday. Although the listing was widely expected this year, the move is seen as a wait-and-see response to the policy shift.

Hanwha Energy holds a 22.15 percent stake in Hanwha, the group’s de facto holding company. Given that other Hanwha affiliates are already listed, floating Hanwha Energy — owned by Hanwha Vice Chairman Kim Dong-kwan, Hanwha Life Insurance President Kim Dong-won and Hanwha Galleria Vice President Kim Dong-sun — could have sparked controversy over duplicate listings.

Earlier this year, Hanwha Group faced shareholder backlash during a rights offering by Hanwha Aerospace.

Duplicate listings, in which both a parent company and its subsidiary are traded, are widely cited as a key driver of the “Korea discount,” or the undervaluation of Korean stocks. Critics argue that spinning off and listing core businesses can hurt parent company shareholders.

The Financial Supervisory Service and the Korea Exchange have signaled a tougher stance under the new administration, with the operator considering guidelines for reviewing duplicate listings.

“After things like physical spinoffs or mergers and acquisitions, my solid, blue-chip shares suddenly turn into an empty shell,” President Lee said during a visit to the Korea Exchange in June, strongly criticizing so-called “split-off listings.”

President Lee Jae Myung delivers opening remarks during a National Fiscal Savings Meeting at the presidential office in Yongsan District, central Seoul, on Aug. 13. [JOINT PRESS CORPS]

As a result, more conglomerate affiliates are scrapping IPO plans. Withdrawing a listing, however, is only feasible for companies whose parent firms are financially strong.

SK Innovation halted the listing process for SK Enmove and instead decided to buy back a 30 percent stake held by financial investors (FIs) for 859.3 billion won ($618.2 million) before merging SK Enmove with SK On.

HD Hyundai has canceled the planned listing of HD Hyundai XiteSolution and will repurchase FI-held shares for 544.1 billion won, making it a wholly owned subsidiary again.

Companies in urgent need of funding worry that they could miss their investment window.

“The new government’s drive is so strong that companies are just keeping their heads down,” said one conglomerate official. “Even firms that need urgent investment are finding it difficult to push IPOs in the early phase of the administration.”

Some argue that not all subsidiary listings should be treated as problematic. LS Group, for example, is preparing to list U.S.-based Essex Solutions, a power magnet wire manufacturer, and is making its case to shareholders. LS plans to file a preliminary review request with the Korea Exchange next month and aims for an early 2026 listing.

From left: Samsung Electronics Executive Chairman Lee Jae-yong, Hyundai Motor Executive Chair Euisun Chung and Hanwha Group Vice Chairman Kim Dong-kwan [YONHAP, HANWHA]

The group stresses that Essex Solutions was acquired from overseas and will be relisted in Korea, rather than spun off from a core business, meaning LS shareholders will not be harmed. LS also announced the cancellation of 171.2 billion won worth of treasury shares to bolster shareholder returns on Tuesday.

Experts caution that while the adverse effects of physical spinoffs should be curbed, choking off corporate fund-raising channels could dampen investment.

“While the new administration says it wants to revitalize the stock market, excessively shrinking the IPO market is a contradictory policy,” said Hong Ki-yong, a business professor at Incheon National University. “Ultimately, giving companies the choice to list is key to creating a business-friendly environment.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom. BY CHOI SUN-EUL [kim.minyoung5@joongang.co.kr]