Korean firms are going public overseas. Their investors aren't happy.

From left: Hyundai Motor CEO Chang Jae-hoon, Hyundai Motor Group Executive Chair Euisun Chung, and NSE CEO Ashishkumar Chauhan during a bell-ringing ceremony celebrating Hyundai Motor India's initial public offering in Mumbai on October 22, 2024. [HYUNDAI MOTOR]

 
[NEWS ANALYSIS] 
 
Several of Korea’s big-name companies are seeking to list their shares abroad in search of hotter, more dynamic capital markets than the stagnant bourses their home turf can offer. But experts say such ambitious moves could come at the expense of investors at home, and perhaps the domestic market as a whole, in the long run.
 
On June 27, 2024, Naver’s Webtoon Entertainment made headlines with a successful Nasdaq debut, which was soon followed by Hyundai Motor India's record-breaking Mumbai initial public offering (IPO). The trend has only grown from there: With LG Electronics now seeking to go public on the subcontinent as well, and Viva Republica consistently rumored to be preparing for a U.S. listing, the push for overseas IPOs is constantly gaining traction.
 

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Expectedly, India and the United States appear to be two of the most popular destinations. The former’s IPO market more than doubled in size last year in a record capital-raising spree as investors flocked to the fastest-growing advanced economy in the world. The latter saw a robust rebound in IPO activities in 2024 after years of slowdown, drawing in capital across the globe.
 
While Donald Trump’s recent tariff announcement has dampened investor sentiment in both economies, a venture overseas still offers Korean companies the prospect of a higher valuation and extra brand recognition. The chronically depressed valuations of equities on the nation's stock markets — a phenomenon known as the “Korea discount” — further nudges them outside the borders. Some of the most high-profile debuts on the country's shaky market this year have gone south, with shares commonly dipping significantly below IPO price in the first few days of trading.
 
Making money is all well and good, but critics question why Korean conglomerates are listing their overseas subsidiaries rather than pursuing domestic funds — or in some cases, forgoing the domestic bourse entirely. What does it mean for investors at home that some of the biggest players in Korea are opting for IPOs abroad?
 
Parent at home left forgotten?
 
In March, LG Electronics was granted approval for its plan to list 15 percent of its Indian subsidiary’s shares in Mumbai within the first half of the year.
 
The home appliance manufacturer is expected to raise up to $1.5 billion with a targeted valuation reported to be between $13 billion to $15 billion, which would exceed its parent’s market capitalization of 12 trillion won ($8.2 billion) on the Kospi bourse if successful.
 
LG plans to use the capital boost to expand its research and development operations and production capacity for home appliances in the world’s most populous nation.
 
“We are seeking the IPO of the Indian subsidiary because of the potential of the country’s market, and the capital inflow is secondary,” LG Electronics CEO William Cho said at a news conference during CES 2025 in January.
 

LG Electronics CEO William Cho speaks during the press conference on Jan. 9 held sideline to CES 2025 in Las Vegas. [LG ELECTRONICS]

 
The move comes on the heels of Hyundai Motor’s massive listing on the Indian stock market last October, which drew in about $3.3 billion. CJ Darcl Logistics, a logistics subsidiary of CJ Logistics, also submitted its offer document to the Securities and Exchange Board of India in 2023 and received approval last March.
 
The $103 million Prague IPO of Doosan Skoda Power — Doosan Enerbility’s Czech subsidiary — on Feb. 6 also aimed to raise funds and secure a foothold in the region following Korea’s selection as a preferred bidder for the Dukovany nuclear power plant project.
 

 
The primary reason for their IPO overseas is, of course, to raise cash for global expansion, especially in promising markets.
 
Despite Cho's characterization of capital inflow as a secondary benefit of LG Electronics' Indian ambitions, the upcoming IPO is fundamentally a carve-out of one of its most promising business units. The firm plans to spend a billion dollars on its Indian arm — which, critiques argue, may come at the expense of investors at home.
 
Dual listing, or the duplicate listing of carved out and split off units, has long been cited as a factor that undermines the Korean stock market’s integrity and often fuels strong backlash from retail investors. While the separate listing of an affiliate can be a quick way to raise money and accelerate growth in the short term, the Korean market has many high-profile cases in which the dilution of a parent company's stake in its subsidiary has harmed its valuation over time. LG Chem, for example, was accused of diluting its shareholders when it spun off LG Energy Solution and listed it separately in 2022; the chemical manufacturer's stock price dropped more than 15 percent the same month. Fellow subsidiary LG CNS hit similar hurdles in its highly anticipated IPO this past February, with shares falling 10 percent on the first day of trading.
 

The Korea Corporate Governance Forum (KCGF) said in a statement in February that moves like LG's “raise reasonable suspicion that the companies are opting for overseas listings to avoid domestic regulators' stricter scrutiny on controversial carve-out listings and investors’ higher standards.”
 
The forum stressed that such carve-out listings are “not a ‘Value-up’ but rather a value destruction,” further aggravating the Korea discount by causing corporate value to flow outward.
 
Webtoon Entertainment’s Nasdaq listing was also not free from such concerns, especially with Naver’s share price on a downtrend before and after its webtoon subsidiary’s IPO. While some analysts projected that a capital boost could eventually help Naver grow in the long run, others, including Shinhan Securities analyst Kim Ah-ram, pointed out that “A short-term negative impact on the parent company Naver will be inevitable, considering the dilution of ownership stake and double-counting issue.”
 
“Does Alphabet list its domestic subsidiary on the Korean stock market just because YouTube Korea became highly profitable? Will Tesla Korea seek an IPO in Seoul because its Model Y and Model 3 were highly popular last year?” said the KCGF.
 
For companies seeking overseas expansion, however, going public may be the only way to raise capital in the current market situation, according to Unicorn Business Institute chief Yoo Hyo-sang.
 
“Though there are controversies surrounding the carve-out IPO issue, [an overseas offering] is perhaps the only option left for large companies to raise multibillion-dollar capital,” said Yoo. “Hanwha Aerospace, for example, faced huge backlash for its 3.6 trillion won rights offering — but a carve-out listing of a subsidiary based overseas is relatively free of risks.”
 

Webtoon Entertainment executives and employees pose for a photo at the bell-ringing ceremony of the company's Nasdaq listing at New York's Times Square on June 28, 2024. [WEBTOON ENTERTAINMENT]

 
U.S. market a “black hole”
 
Meanwhile, for startups eyeing IPOs on Wall Street such as Viva Republica, the U.S. stock market's heavy preference for growth over profit serves as a strong incentive.
 
According to WilmerHale's 2025 IPO Report, only 51 percent of IPO companies last year were profitable, though the figure is significantly higher than 46 percent in 2023 and 28 percent of all IPOs between 2017 and 2021.
 
“In Korea, companies are generally required to be profitable to go public by default, and the IPO of unprofitable companies is only allowed conditionally,” noted Yoo. “But in the United States, many unprofitable companies go public based on their potential, with underwriters taking greater responsibility.”
 
Such regulatory differences could make the U.S. stock market more appealing for companies like Viva Republica, Yoo suggested, as the fintech firm first turned a surplus last year, for the first time in the 11 years since its establishment.
 
The fact that a company successfully debuted on the world’s largest market could also give it an edge back home, Korea Capital Market Institute researcher Lee Jong-eun said, making overseas expansion even more attractive compared to the slower domestic bourse. 
 
“Companies listing overseas consider multiple factors, including the relatively slower pace of the Korean capital market, and the fact that overseas IPO signals confidence in a company’s global potential,” said Lee. “So companies would rather take more time to prepare for listing abroad than to settle for a domestic IPO in the current market climate.”
 
Lee believes the trend is not limited to Korea, noting that “the United States is drawing in capital across the globe, including IPOs, like a black hole.”
 
In theory, if an increasing number of major companies turn their attention abroad for a potentially more profitable U.S. listing, the domestic IPO market could lose further momentum in the long term, with both domestic and foreign investors averting their eyes from their home country — which is why, Lee says, securities exchanges in the Asia-Pacific region, such as those of Hong Kong and Japan, have begun to offer incentives and regulatory support to attract new IPOs.
 
The Korean government has, to an extent, been ramping up efforts to refine its capital market since last year, but with a primary focus on resolving the Korea discount and enhancing the overall quality of the Korean stock market, rather than promoting quantitative growth. Upping the shareholder returns and protection, therefore, remains a necessity for the country to restore fundamental trust in its market.
 
As such, demands for higher shareholder value drove Hyundai Motor to announce a 1 trillion won share buyback last November, using funds raised through its Indian IPO, in an effort to appease its shareholders.
 
But the road to “Value-up” still remains rocky at best, especially with tariffs looming over the global economy and the legislative efforts to bolster shareholder protection stuck at a deadlock.
 
“The true ‘Value-up’ won’t be able to be achieved only with share buybacks or increasing dividends,” said Meritz Securities in a report titled “K-Value-up, Rebooting” on Thursday. “The market will respond only when all three pillars of regulatory improvement, governance transparency and sustainable profitability come together.”

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]