Hyundai Motor, LG, Doosan face uncertainty over U.S. IPO plans

SK hynix Inc.’s decision to halt plans for a Nasdaq listing of its U.S. subsidiary Solidigm has left other South Korean conglomerates facing uncertainty over plans to list overseas affiliates in the U.S. market.

Financial regulators have made clear that parent companies have a duty to protect shareholders even when their subsidiaries pursue overseas listings. With SK hynix effectively backing away from the plan, concerns are growing that other groups could face delays in their own U.S. IPO plans.

SK hynix announced in a regulatory filing on Friday that it had suspended consideration of a pre-IPO fundraising round and an initial public offering for Solidigm, citing overall capital market conditions. While the company pointed to market volatility and a correction in semiconductor stocks, industry observers believe pressure from politicians and regulators also played a role.

Under guidelines for multiple listings announced in July, approval from parent-company shareholders is not mandatory when the subsidiary was not created through a physical split. However, parent-company boards must fulfill five duties based on their obligations to shareholders, including assessing the impact of a listing, preparing safeguards, and communicating with investors. These requirements apply to overseas listings as well as domestic ones.

Cases of overseas IPO plans being blocked at the board level have already emerged.

MS Group’s proposal to list its subsidiary Simwon America on Nasdaq, which was seen as similar to Solidigm’s plan, was halted by the parent company’s board on October 20.

The regulatory climate could disrupt strategies by companies seeking to use overseas listings to raise capital and expand globally.

For Hyundai Motor Group, a potential listing of Boston Dynamics Inc. is seen as more than a fundraising opportunity ? it could also help reshape the group’s ownership structure.

Hyundai Motor Group is the only one among Korea’s 10 largest conglomerates that still maintains a circular shareholding structure linking Hyundai Mobis Co., Hyundai Motor Co., Kia Corp. and back to Hyundai Mobis.

Its Executive Chairman Chung Euisun holds just a 0.33 percent stake in Hyundai Mobis, which sits at the top of the group’s governance structure.

Analysts have speculated that Chung’s 25 percent stake in Boston Dynamics could help fund the unwinding of the circular shareholdings. Some estimates have put the robotics company’s potential valuation at as much as 146 trillion won ($110.29 billion).

LG Electronics Inc. has been pursuing a New York stock market listing for its U.S. robotics subsidiary Bear Robotics Inc., while Doosan Corp. has been seeking to list its U.S. hydrogen and fuel cell subsidiary HyAxiom Inc. on the same market.

Bear Robotics has reportedly begun approaching investors for a pre-IPO fundraising round, while HyAxiom has also initiated the process of selecting IPO underwriters.

All three subsidiaries require substantial funding for research and development and capital investment but have yet to generate profits independently, making IPOs an important source of financing, sources said.

Boston Dynamics recorded a net loss of 528.4 billion won last year, while HyAxiom has accumulated net losses of approximately 370 billion won over the four years since 2022.

If their listings are blocked, parent companies may have to provide more funding, they said.

Hyundai Motor Group had planned to begin deploying its Atlas humanoid robots at its U.S. factories in 2028 and establish an annual production capacity of up to 30,000 units by 2030.

Doosan Group also faces the burden of a put option.

HyAxiom raised approximately $160 million through the issuance of convertible preferred shares (CPS) in July 2023, promising to complete an IPO within four years of the issuance date.

Under certain circumstances, HyAxiom investors can exercise their right to demand that Doosan Corp. repurchase their shares.

If the IPO is delayed and the put option is exercised, the group’s financial burden could increase.

Some industry observers warn that blanket restrictions on overseas subsidiary listings could cause companies to miss critical windows for raising large amounts of capital. If parent companies must continue financing their subsidiaries, their own shareholders could ultimately be disadvantaged.

Companies argue that their circumstances differ from those of SK hynix, which is generating hundreds of trillions of won in annual cash flow amid a semiconductor boom, and are calling for regulators to assess each case individually.