[비즈한국] LS006260 minority shareholders have signaled collective action against the company. This comes as LS Group pushes ahead with the domestic KOSPI (Korea Composite Stock Price Index) listing of Essex Solutions, a U.S.-based great-grandchild company that manufactures winding wires, despite fierce opposition from minority shareholders. Shareholders fear this listing will lead to another 'LG Chem051910-LG Energy Solution373220' style situation, resulting in the erosion of LS's corporate value.
According to ACT, an online platform for minority shareholders, as of the 20th, the stake held by LS shareholders who have joined the movement against the Essex Solutions listing reached approximately 0.91%. Generally, to exercise shareholder proposal rights or request an extraordinary general meeting under the Commercial Act, one must secure 3% of the total issued shares. However, Article 542-6 of the Commercial Act (Minority Shareholder Rights), a special provision for listed companies, allows individuals who have held at least 0.15% (1.5 per 1,000) of the total issued shares of a listed company for six consecutive months to exercise shareholder rights. Industry observers believe the LS shareholders' potential for collective action is now within reach.
The shareholder group aims to consolidate voices to block the listing of Essex Solutions and further push for the entry of outside directors to the LS board who can represent the interests of general shareholders. A representative of the shareholder group stated, "We sent a content-certified mail to the company on the 16th requesting access to and copying of the shareholder registry," adding, "Once we secure the registry, we will send letters to shareholders to formalize opposition and decide on the specific level of our response."
Shareholders argue that there is no reason for Essex Solutions to list on the domestic stock market and invite controversy over 'double counting.' When LG Energy Solution was split off from LG Chem and listed on the KOSPI in 2022, LG Chem's stock price was hit directly by the 'holding company discount.' This is because when a profitable business unit is split off and listed, the parent company is left as a hollow shell, and existing shareholders can no longer assert direct rights over the lucrative subsidiary. In particular, because Essex Solutions is a great-grandchild company of LS (LS → LS I&D → Superior Essex → Essex Solutions), the connection to parent company shareholders becomes diluted across multiple levels upon listing.
SK Innovation096770 has also been struggling for years with the listing of its battery subsidiary, SK On. Although it split off its battery business unit in 2021 with the intention of listing, the plan has been indefinitely postponed due to shareholder backlash. Currently, the company is seeking alternative routes such as a merger with SK E&S to appease shareholders.
LS shareholders argue that a public listing is not the only alternative for capital expansion. A representative of the shareholder group pointed out, "If Essex Solutions has a solid position in the North American market, it would be more advantageous for shareholder value to attract strategic investors (SI) like global companies, including Tesla, or proceed with a third-party paid-in capital increase."
Shareholders also have a cold reaction to the plan recently announced by LS to prioritize the allocation of the subsidiary's public offering shares to the parent company's shareholders. On the 15th, while pushing for the Essex Solutions IPO, LS announced that it is discussing with relevant authorities a plan to allocate the same shares as the public offering specifically to LS shareholders, in addition to the general public offering subscription. A representative of the shareholder group criticized this as a "typical ploy," stating, "It is a failed precedent where companies like Oscotec039200 and LTC also proposed shareholder allocation during similar split-off listing controversies, only to fuel more backlash from shareholders." Shareholders are posting reactions in online communities such as, "Why should I have to pay to buy shares of a company I helped grow with my own money?", "This isn't appeasing shareholders, it's deception," and "The management's decision, which risks the evaporation of at least 1 trillion won in market capitalization, must be retracted."
Essex Solutions is a company that manufactures specialty winding wires, which are essential materials for electric vehicle motors and transformers. The purpose of the KOSPI listing is to raise approximately 500 billion won to invest in facilities in the U.S. to respond to the power industry's super-cycle.