Debate Over IPO Success and Lack of Shareholder Return Plan Sparks Controversy

IPO ‘biggest hit’ in the first half of the year… Debate over the effectiveness of guidance due to the lack of a shareholder return plan

HD Hyundai Marine Solution (Marine Solution), which is affiliated with HD Hyundai, will be listed on the stock market on the 8th. There is interest to see if it will be a success as the 25 trillion won has been poured into the public offering a stock subscription, but as it was a ‘split listing’ that happened immediately after the financial authorities released the Upsell Program guidelines, concerns are being raised. about damage to shareholder value and a debate is raised about the effectiveness of the guidelines.

Marine Solution is a company created in November 2016 by splitting the ship repair and after-sales service (AS) division of HD Korea Shipbuilding & Marine Engineering (then Hyundai Heavy Industries). The largest shareholder is HD Hyundai with a 55.8% stake. The public offering price is 83,400 won, and the market capitalization based on the public offering price alone equals 3.7017 trillion won.

Investors are showing strong interest in the first large-scale initial public offering (IPO) in a long time. The competition rate for Marine Solution’s public offering to general investors is 255 to 1, and the subscription profit alone amounts to 25 trillion won.

However, the opinion on the listing of Marine Solutions is not positive. This is because HD Hyundai went public in a split way in the name of fundraising, effectively going against the value up program.

Split listing refers to a parent company dividing its core business into a subsidiary and listing it. When a parent company and a subsidiary are listed overlapping, the value of the parent company is transferred to the subsidiary and the stock price of the parent company falls. For this reason, split lists are considered a major factor in the ‘Korea decline’, which damages the shareholder value of the parent company and hinders long-term investment.

Representative examples are LG Chem, which split LG Energy Solutions and listed it, and Kakao Bank and Pay, which were separated from Kakao and listed. LG Chem’s stock price, which exceeded 1 million won in 2021, plunged into the 600,000 won range after the listing of LG Energy Solutions in January 2022, and has not recovered, currently in hovering around the 400,000 won range. HD Hyundai’s stock price has also been sluggish since April, falling 11.4% until the 7th, the day before Marine Solutions listed.

It is not that the authorities are sitting idle. As public opinion against demerger listings grows in 2022, the Financial Services Commission proposed measures to strengthen the listing review of subsidiaries listed within five years of the demerger and to give stock purchase rights to shareholders who oppose the partition. However, this regulation did not apply to Marine Solutions, 7 years after the outcome.

Controversy over the effectiveness of the value up guidelines has increased. According to the ‘Corporate Value Improvement Plan’ published by the financial authorities on the 2nd, listed companies can disclose governance indicators, including duplicate listing of parent companies. However, it is not mandatory, and it is not clear whether the controlling shareholder, as in the case of Marine Solutions, will meet these expectations. Kim Jin-bang, a professor at Inha University, said, “Because controlling shareholders place more emphasis on the benefits that come from control, they may make management decisions that go against the interests of general shareholders even age if property values ​​fall,” adding, “Splitting and listing are among them.” Unless HD Hyundai announces protection measures for the parent company’s shareholders, the damage from the drop in stock prices will inevitably fall on general shareholders.

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