The world’s second-largest electric-vehicle battery maker,
LG Chem
-owned
LG
Power, is hoping a separate itemizing will give the enterprise slightly extra spark.
Given the unbelievable investor curiosity in EVs proper now, the corporate’s mammoth IPO will most likely unlock substantial worth for its dad or mum firm, and likewise assist finance the large capital expenditures wanted to maintain up with rising demand. New buyers could profit too—so long as the corporate can keep away from additional missteps just like the Chevy Bolt battery recall.
The South Korean battery firm stated after the native market shut Tuesday that it’ll increase practically $11 billion in what could be the nation’s biggest-ever IPO. On the excessive finish of the value vary, LG Power shall be valued at round $60 billion, making it the third most dear Korean listed firm. Shares in its dad or mum, LG Chem, which can nonetheless personal round 80% of the corporate after the IPO, jumped 5.6% Wednesday.
Development within the electric-vehicle sector is the massive draw of the deal. McKinsey expects battery-cell manufacturing capability to greater than triple by 2025. Certainly, LG is trying to ramp up its capability all over the place from China to the U.S., utilizing cash raised from the IPO.
LG Power had round 23% of the battery marketplace for passenger autos globally within the first 10 months this yr, behind the 28% managed by China’s Up to date Amperex Expertise (CATL) in accordance with SNE Analysis. CATL has benefited from explosive development in EV gross sales in China: Gross sales of new-energy automobiles, together with plug-in hybrids, have practically tripled year-over-year within the first 10 months of 2021, in accordance with the China Passenger Automotive Affiliation. LG has partnerships with
Normal Motors
and Stellantis, proprietor of
Fiat Chrysler.
However taking a experience with the inventory gained’t be low-cost. On the excessive finish of the value vary, the corporate’s enterprise worth would equal 33 occasions its earnings earlier than curiosity, taxes, depreciation and amortization. The bankers on the deal consider that is nonetheless under the trade common, however largely as a result of they’ve used solely two corporations for comparability within the IPO filings. One is CATL, which trades at an EV to Ebitda a number of of greater than 80. The Chinese language battery maker now has a market worth of $234 billion. Its shares have greater than quintupled in worth because the finish of 2019.
Nonetheless, whereas the LG Power IPO will most likely do properly given the frenzy in all issues EV, there are clear dangers down the highway. Competitors is rising. Aside from CATL, different Chinese language battery makers comparable to BYD and Guoxuan have additionally skilled sturdy development this yr. Making certain security is one other key: LG Power, along with affiliate LG Electronics, must compensate GM for the current recall of Chevy Bolt, to the tune of $1.9 billion.
Traders don’t wish to be left behind within the courageous new all-electric future. However the experience could not come low-cost.
Write to Jacky Wong at jacky.wong@wsj.com
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