The final guidelines on dual listing regulations have prompted changes in the strategies of companies preparing for initial public offerings (IPOs). HD Hyundai Robotics, a subsidiary formed through a physical division of HD Hyundai, must navigate new shareholder protection procedures, while LS E6 Solutions is also required to restructure its plans to meet enhanced review standards.
According to industry sources, the implementation of the '3% rule' following amendments to corporate law and the visible reform of dual listing systems have accelerated the movements of companies pursuing IPOs.
HD Hyundai Robotics faces challenges as it is a prime example of dual listing, which the new guidelines prohibit. After selecting an underwriter and initiating the IPO process earlier this year, the company halted its listing efforts in March as regulatory actions against dual listings gained momentum.
Industry analysts believe that the recent announcement will complicate the listing process for HD Hyundai Robotics. Even if its asset, revenue, and operating profit ratios are not significant, the fact that it is a subsidiary formed through a physical division increases the likelihood that it will need to undergo shareholder protection procedures.
Notably, the absence of separate exceptions for advanced industries such as robotics and artificial intelligence means that HD Hyundai Robotics will be subject to the same standards as other subsidiaries formed through physical divisions. The ability to convincingly present the necessity of listing and strategies to enhance existing shareholder value will be critical factors in future exchange reviews.
LS Group, which withdrew LS E6 Solutions' IPO in January, is another company affected by the new guidelines. With the clarification of shareholder protection principles, LS will face the burden of demonstrating enhanced shareholder protection measures and the necessity of listing if it attempts to reinitiate its subsidiaries' IPOs.
However, LS E6 Solutions differs from HD Hyundai Robotics as it was incorporated through the acquisition of a foreign company rather than a physical division. Financial authorities have mandated that subsidiaries formed through physical divisions obtain shareholder consent, while acquired subsidiaries will undergo individual reviews considering the need for general shareholder protection and the specific circumstances of each company.
It is likely that LS E6 Solutions will not immediately be subject to the shareholder consent requirement but will need to establish shareholder protection measures before undergoing special reviews by the exchange.
Hanwha Group is also closely monitoring the situation. Hanwha Energy pursued an IPO last year and secured significant pre-IPO investments, but the tightening of dual listing regulations necessitates a reassessment of its listing strategy. However, Hanwha maintains that its subsidiary will not pursue a separate IPO after a physical division, thus not falling under dual listing regulations.
Professor Hwang Yong-sik of Sejong University stated, "These guidelines do not convey a message against listing but rather demand that companies explain why listing is necessary and how they will protect existing shareholders." He added, "In the future, the ability to persuade general shareholders will become the most important competitive advantage for companies, rather than the listing structure itself."
He emphasized that if the goal is to adopt a U.S.-style shareholder capitalism model, management must also establish defenses against hostile takeovers, stating, "While introducing systems that enhance shareholder rights, such as the 3% rule, it is essential to balance these with measures to protect management rights."
* This article has been translated by AI.
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