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LG Energy aims to raise record $10.7 billion in IPO

LG Energy

If successful, this would give LG Energy a valuation of around 70 trillion won ($0.059 trillion), putting it behind only Samsung Electronics and SK Hynix on the Korea Exchange

South Korea’s LG Energy Solution has its sights on taking the EV battery crown from China’s CATL, with plans to expand production in six countries and to develop cutting-edge power cells with the proceeds of its potentially record-breaking stock market debut.

LG Energy and parent LG Chem aim to raise 12.75 trillion won ($10.7 billion) through the former’s initial public offering (IPO) on Jan. 27 which is more than double the current record in South Korea of 4.9 trillion won ($0.0041 trillion) held by Samsung Life Insurance in 2010.

If successful, this would give LG Energy a valuation of around 70 trillion won ($0.059 trillion), putting it behind only Samsung Electronics and SK Hynix on the Korea Exchange.

The supersized IPO by the world’s second-largest maker of electric-vehicle batteries has whipped up frenzy in South Korea. Bids from institutional investors outpaced the supply of shares by more than 2,000 to 1.

With demand for EV batteries poised to surge, some market watchers believe LG Energy’s market cap is on track to reach the 200 trillion won ($0.17 trillion) mark.

At an event on Jan. 10, CEO Kwon Young-soo said the company will increase its battery production capacity 2.6 times over three years to 400 gigawatt-hours.

LG Energy supplies batteries to automakers such as Volkswagen, Tesla and Audi, as well as the alliance of Renault, Nissan Motor and Mitsubishi Motors.

While these contracts are believed to be long-term, the company still needs to lift capacity to deliver on its commitments.

Expansion plans are already underway in six countries. LG Energy will invest 5.6 trillion won ($0.0047 trillion) in a joint factory with General Motors in the U.S., as well as 1.4 trillion won ($0.0012 trillion) in its own plant in Poland, 1.2 trillion won ($0.0010 trillion) in China, and 645 billion won ($0.54 billion) in South Korea.

It is also building a joint plant with Stellantis in Canada and Hyundai Motor in Indonesia. Part of the proceeds from the IPO will go toward these large-scale investments.

The race for the lead in EV battery market share is tight. CATL, or Contemporary Amperex Technology Co., Ltd., was the top player in 2020 at 25.3%, according to Tokyo-based Techno Systems Research. LG Energy followed at 22.7%.

‘When you look at materials technology and intellectual property, we are ahead’ of CATL, Kwon said. He was bullish that orders will grow as automakers in the Europe and the U.S. embrace EVs.

Kwon sees CATL’s higher dependence on Chinese customers as a weakness.

We have the lead when it comes to securing global clients based in Europe and the U.S., which will increase our market share in the future, he said.

CATL’s international customers include Tesla, BMW, Toyota Motor and Honda Motor, but the company still generates 80% of its revenue in China.

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