LG Energy Solution to decide by October whether to pursue IPO this year

South Korean battery maker LG Energy Solution (LGES) said on Monday it will decide by October whether to pursue its planned initial public offering (IPO) this year, after a vehicle recall involving LG batteries clouded it outlook.

LGES, wholly owned by LG Chem Ltd from which it was carved out last year, in June said it planned to complete the IPO process in 2021.

The IPO was widely tipped to be South Korea’s biggest-ever listing, potentially raising $10 billion to $12 billion.

But the IPO’s timing was thrown into doubt this month when General Motors Co expanded a recall of its Bolt electric vehicle to more than 140,000 cars to replace LG battery modules due to fire risk, at a cost it estimated at $1.8 billion. The automaker said it would seek reimbursement from LG.

GM, LGES and LG Electronics Inc are still investigating the cause of what GM called manufacturing defects. LG Electronics assembles LGES battery cells into battery modules and packs.

“The size of additional provisions in the third quarter will be decided later, depending on the progress of the joint investigation between the three companies,” LGES said in a statement on Monday.

LGES said GM is its important customer with more than 10 years of strategic partnership and that the two companies will continue their firm relationship.

Analysts said the IPO schedule is likely to depend on how long negotiations between LGES and GM take to decide on the split of the recall cost.

“It is not that LGES is withdrawing its IPO plan, but the timing of its listing could be postponed depending on how the negotiation with GM goes,” said Samsung Securities analyst Cho Hyun-ryul.

LGES needs to pursue its IPO regardless of recall issues to finance expansion plans, Cho said.

Shares in LG Chem were down 1% as of Monday morning trade, versus the KOSPI’s 0.3% rise.

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