LG headquarters on Yeouido in Seoul / Yonhap
By Anna J. Park
On the trading day that LX holdings made its debut at the main benchmark KOSPI after spinning off from LG Corp., shares of both firms dropped sharply to the dismay of their shareholders.
LG Corp., the holding company of LG Group, saw its share price plunge by 9.21 percent to finish at 108,500 won ($97) at the closing of Thursday’s session, while LX Holdings also fell by 5.14 percent, closing at 12,000 won.
Since the start-off, LX Holdings once rose as high as 14,300 won at 9:44 a.m. (KST), yet it continued to fall, despite fluctuations, until the price ended at 12,000 won. LG Corp.’s stock plunge was much more severe than LX’s, as the price began to fall sharply just within a few minutes since the start of the trading, hitting as low as 107,500 won at around 10:56 a.m., and hovered at around similar prices during the rest of the trading session.
As of the closing price, LG’s market cap stood at 17.6 trillion won, while LX Holdings hit 915 billion won, lower than the respective forecasts of 19.9 trillion won and 1.9 trillion won expected by market experts prior to the listings. Thus, Thursday’s price actions were taken as somewhat of a surprise, as some market analysts expected the two stocks wouldn’t face much negative volatility from the spinoff, given the shares’ solid valuation calculated in consideration of the split effect.
However, market watchers remain positive that both stocks have room for upward moves, with expectations for their future strategic directions on cash dividends and efficient investment. An LX company official also stressed that the company’s synergy-creating strategic business strategies will maximize the holdings company’s market value in the medium and long term.
“While we put a communication with the market as the foremost priority, the company will work on creating synergy effects among the five units’ new growth engines and business innovations,” an official from LX Holdings told The Korea Times.
“As opposed to LG maintaining a focus on the global electronics and energy sector, LX has a wide spectrum of business portfolios, ranging from chemical manufacturing, construction materials, semiconductor technology to logistics, all which enjoy a global presence and competitiveness,” she explained, adding that the different set of global business models will create synergized strength in their cooperation in business strategies for creating new growth models.
In hopes for efficiently focusing on main business areas, such as electronics, chemistry and secondary batteries, LG decided to separate some of its affiliates last November. LX Holdings was officially launched in May, with five units of LG International, LG Hausys, LG MMA, Silicon Works and Pantos Logistics.
Despite previous opposition to the spinoff by U.S.-based hedge fund Whitebox, which holds about 1 percent of LG Corporation shares, about 76 percent of shareholders of the holdings company voted in favor of the firm’s spinoff plan to create LX Holdings during the annual shareholders’ meeting held in March.