Activist fund Palliser Capital said on Tuesday that LG Chem Ltd. trades at a 74% discount to its net asset value, the widest among the units of all South Korean conglomerates, driving the chemical company’s share price to its highest level in one and a half years.
To “unlock over 100% upside on LG Chem’s current share price,” the London-based fund urged the majority shareholder of LG Energy Solution Ltd. to reform its board of directors and buy back shares using its stake in the electric vehicle battery maker.
“LG Chem is currently valued as a bottom-of-the-cycle petrochemical company with little credit for its 79% stake in LG Energy Solution,” Palliser said in a presentation at 13D Monitor’s 2025 Active-Passive Investor Summit in New York.
As one of the top 10 shareholders of LG Chem with a stake over 1% in the company, it estimated the gap between LG Chem’s market value and intrinsic value at 69 trillion won ($48 billion).
“We see a seismic opportunity for LG Chem to adopt bold initiatives that embody the ‘LG Way’ philosophy,” James Smith, Palliser’s founder and chief investment officer, said at the summit.
Following Palliser’s comments, LG Chem’s share price soared as much as 14.3%, touching 395,500 won, its highest intra-day level since April 2024. The stock trimmed its advance to close up 13.01% at 391,000
By comparison, the Kospi index finished up 1.56 % at 3,883.63, taking a breather after climbing to an all-time high of 3,893.06 on Tuesday.
BUYBACK PROPOSAL USING LG ENERGY SHARES
In the presentation under the title “Unlocking LG Chem’s deep discount,” Palliser proposed four value enhancement steps.
They includ an overhaul of its board of directors and management compensation systems, return-oriented capital allocation and execution of share buyback-in-kind utilizing its stake in LG Energy Solution.
A share buyback-in-kind means LG Chem pays its share repurchase by distributing LG Energy shares instead of cash.
FRESH CAPITAL RAISING
In the first half of this year, LG Chem swung to a 68.5 billion won ($48 million) loss, compared to an operating profit of 193.6 billion won in the same period of last year.
Palliser’s recommendation came on the heels of LG Chem’s capital raising of 2 trillion won to finance its ongoing corporate restructuring, according to its regulatory disclosure on Oct. 1.
It raised the fund via a price return swap (PRS) transaction, in which securities firms advance cash against the future value of the pledged shares.
Palliser also urges LG Chem to implement an open-ended, long-term discount management program, which might align with South Korea’s corporate and economic reforms and in particular South Korean President Lee Myung Bak’s Kospi 5,000 vision.
It refers to a government-led campaign to propel the benchmark stock index to 5,000 points, a milestone the domestic stock market has never achieved.
Palliser said LG Energy Solution has strategically and successfully positioned itself as the leading EV battery supplier in the US and is well-positioned to capitalize on the high US EV growth expected.
LG Energy Solution, with market capitalization of 27.57 trillion won, is the third-most valuable company after Samsung Electronics Co. and SK Hynix Inc. on the Kospi market.
Palliser is one of the most outspoken foreign activist investors targeting South Korea’s family-run business groups, including Samsung and SK.
In November, SK Square Co., the investment arm of South Korea’s No. 2 conglomerate SK Group, announced shareholder-friendly measures, in response to Palliser’s push to boost corporate value.
By Eun-Kyung Song
norae@hankyung.com
Yeonhee Kim edited this article.
