LG Energy Solution's IPO Underwriter Selection: A Delicate Balance of Loyalty and Conflict

LG Energy Solution's planned initial public offering (IPO) has sparked debate over the selection of an underwriter, with Citigroup Global Markets Securities emerging as a potential candidate despite its close ties to SK Group, a fierce rival in the electric vehicle (EV) battery market. The EV battery manufacturing subsidiary of LG Chem has already decided not to send out requests for proposals (RFPs) to the underwriters for the listing of SK IE Technology (SKIET) to prevent a conflict of interest, citing the intensifying legal battle between SK Innovation and LG Energy Solution over patent infringement allegations. Meanwhile, Citigroup's recent collaborations with SK Group, including advising SK Holdings and SK EandS on their joint investment in Plug Power, may hamper its chances of winning the bid.

Key Takeaways:

• LG Energy Solution's IPO valuation is estimated at up to 100 trillion won ($90 billion), significantly larger than SKIET's 5 trillion won valuation.
• Citigroup is not participating in the SKIET IPO, but its close ties to SK Group may affect its selection as the underwriter for LG Energy Solution's IPO.
• Morgan Stanley and Goldman Sachs are considered among the strongest candidates for the underwriter position, given their reported involvement in LG Chem's consideration of spinning off its EV battery business.
• LG Energy Solution's loyalty to its group will likely be the core factor in the selection of the underwriter, but Citigroup's track record in various deals involving Samsung Group may also be a variable.
• The intense rivalry between LG Group and SK Group in the EV battery market has significant implications for the selection of the underwriter and the potential conflicts of interest that may arise.

Statistics:

• Estimated valuation of LG Energy Solution's IPO: up to 100 trillion won ($90 billion)
• Valuation of SKiET: 5 trillion won
• Amount invested by SK Holdings and SK EandS in Plug Power: 1.6 trillion won
• Amount acquired by SK hynix from Intel's NAND memory and storage business: $9 billion
• Number of participants in the local IPO market: 1 (as lead underwriter for the listing of SK Biopharmaceuticals on the KOSPI)

Sources:

• "LG Energy Solution may go public with Citi as underwriter" [Republic of Korea: The Korea Times], Choi Hee-sung, 2022
• "LG Chem's IPO may be canceled due to conflict of interest over SK Group" [The Korea Herald], Park Wan-sub, 2022
• "SK Innovation may have been persuaded by Biden's environmental policies" [The Korea JoongAng Daily], Kim Seung-kyu, 2022
• "LG Chem considering spinning off EV battery business" [Bloomberg], Kim Yoo-jin, 2022