Speculation is growing that LG CNS, a major player in this year’s Initial Public Offering (IPO) market, might delay its listing again due to poor performance. If LG CNS’s performance remains similar to the first quarter, its expected corporate value could fall short of the anticipated 7 trillion won, landing around 5 trillion won. This situation puts LG CNS in a dilemma, as it needs to initiate the IPO process in the second half of this year to meet the financial investor exit deadline next year.
In April, LG CNS held a private non-deal roadshow (NDR) in Hong Kong and Singapore for overseas investors. NDR is a type of investment presentation aimed at attracting large-scale public offerings. This led to industry speculation that LG CNS’s IPO was imminent. The company must complete its IPO by April next year. LG Corp., the parent company, sold a 35% stake in LG CNS to global private equity firm Macquarie Asset Management’s PE division for 950 billion won in 2020, with a plan to pursue an IPO within five years. In 2022, LG CNS appointed KB Securities, Bank of America, and Morgan Stanley as lead underwriters for its IPO preparations. However, interest rate hikes in major countries in 2022 caused a freeze in the IPO market, halting their preparations.
Typically, it takes about six months from filing for a preliminary review with the Korea Exchange for a KOSPI listing to the actual listing. To meet the investor exit deadline of April next year, LG CNS needs to file for the preliminary review by October this year. However, there are concerns that LG CNS may not proceed with the listing this year. Although the IPO market has been recovering, significant concerns about performance volatility remain.
Until last year, LG CNS had consistently shown good performance. Its sales increased from 4.1431 trillion won in 2021 to 4.9696 trillion won in 2022, and to 5.6053 trillion won in 2023. However, profitability declined in the first quarter of this year. Sales were 1.0704 trillion won, with an operating profit of 32.3 billion won, reflecting a 2% increase in sales year-on-year but a 49% drop in operating profit. Net profit also plummeted by 70% to 12.7 billion won. Even considering that the first quarter is usually a low season for the IT industry, these results are disappointing.
“There have been talks about listing every year, but they were just rumors. No one knows when it will actually happen. However, efforts are being made to achieve growth in sales and operating profit,” said an LG CNS employee who wished to remain anonymous.
Hana Securities analyst Choi Jeong-wook commented, “The increase in LG CNS’s operating costs is due to temporary costs associated with new projects. It seems Macquarie is not fixated on the IPO deadline. However, if market conditions improve to the extent that LG CNS can receive a fair valuation, they are likely to start the IPO process at any time.”
