'A Must Own Stock': Tesla Supplier LG Energy Shines in Blockbuster IPO Debut, Shares Surge 68% to Push Market Cap to $98 Billion

January 27, 2022 6:43 AM EST
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Shares of the South Korean battery maker LG Energy Solution jumped 68% on its trading debut after the company secured $10.6 billion in its initial public offering (IPO) - the largest ever raised in South Korea.

The deal underscores investors’ significant interest in the electric vehicle (EV) industry. LG Energy, which supplies some of the automotive giants including Tesla, GM, and Hyundai, reached a valuation of almost $100 billion on its first day of trading.

Yoojeong Oh, investment director for Asian equities at Abrdn, noted there are “good structural growth trends” backing LG Energy’s operations, in spite of the current volatility in the broader market.

The IPO was significantly oversubscribed as investor orders surpassed the stock on offer by miles. Investors were collectively looking to buy around $12 trillion in stock, according to IPO filings.

The deal marks the largest global IPO since the U.S. EV maker Rivian Automotive Inc’s raised $13.8 billion in November.

On its Thursday trading debut in Seoul, shares of LG energy jumped 68% from their IPO offer price, closing the session at 505,000 South Korean won ($422) a share.

“The company will benefit from the Buy American Act although its low profitability and rising raw material prices remain a concern,” Kim Young-woo, an analyst at SK Securities, told FT.

The battery maker plans to use a part of the funding to fuel its $5 billion investment program in the U.S. in a bid to expand production capacity at plants in Michigan and at a joint venture with GM. LG Energy will also invest some of the proceeds to expand in Europe and China, the filing showed.

For Choi Joon-chul, head of VIP Research and Management, there is no doubt whether investors should own LG Energy shares.

“Many funds will try to have some exposure to the stock, given its huge market cap. It is a must-have stock for passive index funds, regardless of its valuation,” he told FT.

The stock price surge took LG Energy’s market value to around 118.2 trillion won ($98.7 billion), making it the second highest-valued public South Korean company, behind Samsung Electronics.

By Senad Karaahmetovic | [email protected]

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