Korea Moves to Rein in Dual Listings to Protect Shareholder Value, Leaving Offshore Carve-Out IPOs as the Next Challenge

Lee Jae-myung Sends a Clear Warning on Korea’s Duplicate-Listing Practice
LS Drops Its IPO Plan Amid the Dual-Listing Debate, Forcing Other Conglomerates to Rethink Subsidiary Listings
Tighter Rules Could Fuel Offshore Spin-Off Listings, Raising the Need for Policy Safeguards

Tension is mounting across Korea’s IPO market as pressure builds on companies pursuing duplicate listings, starting with LS Group, which was directly singled out by President Lee Jae-myung. With signs emerging of tougher government scrutiny on dual listings, analysts warn that regulators will need to get ahead of potential side effects—such as offshore spin-off IPOs—to ensure the effectiveness of any new rules.

LS Cancels IPO of U.S. Unit Amid Dual-Listing Backlash

LS said on the 26th that it has decided to withdraw the IPO of Essex Solutions after hearing concerns from minority shareholders, investors, and other stakeholders, citing the need to strengthen shareholder protections and rebuild trust. LS had been preparing to list Essex Solutions, a U.S.-based specialty winding manufacturer ultimately controlled by the group through multiple layers of subsidiaries, but the plan quickly became caught up in controversy over duplicate listings. The ownership chain runs from LS (95.4%) to LS I&D (100%), then to Superior Essex Inc. (78.95%), and finally to Essex Solutions.

The backlash spilled beyond shareholders into the political arena. At a luncheon with lawmakers from the Democratic Party’s KOSPI 5000 Special Committee on the 22nd, President Lee Jae-myung criticized duplicate listings as a “chronic and widespread problem” that should not be left unaddressed. He was also reported to have referenced LS directly by citing a media headline titled “I Don’t Buy Stocks With an ‘L’ in the Name,” underscoring the government’s increasingly explicit stance against the practice.

Against this backdrop, major conglomerates are expected to rethink subsidiary listing strategies. HD Hyundai Robotics, which is pressing ahead with an IPO despite the controversy, is widely seen as among the most exposed. The company has appointed UBS, Korea Investment & Securities, and KB Securities as lead underwriters, and HD Hyundai held an 81.82% stake as of November last year—meaning an IPO would create a parent–subsidiary duplicate-listing structure.

Other would-be issuers, including Hanwha Energy, DN Solutions, and SK Ecoplant, are also unlikely to escape pressure. Some have raised large sums from financial investors in pre-IPO rounds, increasing the risk of exit pressure if a listing is delayed or derailed. Meanwhile, preliminary IPO reviews for Hancom InSpace, DTS, and Deoksan NEPCores have already been suspended—each a subsidiary of a listed company that has faced scrutiny over dual-listing concerns.

Why Frequent Dual Listings Are Seen as a Structural Flaw

Dual listings have long been cited as a chronic flaw in Korea’s stock market. According to NH Investment & Securities, as of December last year, companies involved in dual listings accounted for 18.0% of total market capitalization in Korea. The figure stands out sharply compared with Japan (4.0%), Taiwan (2.7%), and the United States (0.05%). By contrast, among flagship New York–listed firms such as Tesla, Nvidia, and Apple, there are virtually no cases where core businesses have been carved out and separately listed as subsidiaries. Globally, the prevailing strategy is to concentrate corporate value in a single listed entity and manage shareholder and market trust over the long term.

Experts trace Korea’s entrenched dual-listing problem back to the aftermath of the 1997 financial crisis. A system allowing spin-offs through physical divisions was introduced to prevent cascading bankruptcies and facilitate corporate restructuring, but it later became widely exploited. Once companies recognized the upside of dual listings, they began carving out crown-jewel units and taking them public. While listing a subsidiary typically reduces the parent’s ownership stake, as long as controlling shareholders retain control, the parent company can continue to exert decisive influence. In effect, firms can expand using outside capital while still steering decisions in ways that favor controlling owners.

This practice draws criticism because dual listings dilute parent-company value and inflict significant losses on existing investors. When a prized business unit is listed separately, new shareholders gain direct claims on that asset, while existing parent-company investors effectively lose control over it. That is why shareholders who bought into a parent company for its core assets often denounce dual listings as a breach of trust. At the same time, holding-company shares are exposed to a “double-counting” discount, with valuations marked down by the market value of listed subsidiaries—leaving shareholders’ wealth eroded and inadequately reflected in market prices.

Tougher Rules Could Bring Unintended Side Effects

The bar for dual listings is likely to rise sharply. After the government sent a direct warning on the practice, the Korea Exchange is also moving to address the issue, aiming to revise its detailed listing-rule provisions in the first quarter of this year and drafting “dual-listing guidelines” in the process. The guidelines are intended to spell out clearer standards and improve predictability for market participants. A draft could be completed as early as next month, after which the exchange plans to revise the rules following consultations with financial authorities.

The risk is that tighter restrictions at home could push more companies to look overseas. A frequently cited example of such “offshore carve-out listings” is LG Electronics’ India unit. Until the listing, the India subsidiary was wholly owned by LG Electronics in Korea. The company listed the unit locally by selling only existing shares—without issuing new shares—by offloading 15% on the Indian market while retaining the remaining 85%.

Critics say the structure can undermine the interests of ordinary shareholders in the parent company. LG Electronics had been fully consolidating the India unit’s assets and earnings into its group financials, and the subsidiary is estimated to account for roughly 10% of the company’s total net profit. Once part of the stake was sold and the unit listed, however, the portion corresponding to the divested shares effectively moved out of the parent’s reach. While LG and LG Electronics argue the market should still recognize the value of the remaining 85%, many investors see attempts to have the parent fully credited for a separately listed subsidiary as a form of double counting. In that environment, the parent’s retained stake can end up being marked down in the Korean market. There is also the potential for conflicts between shareholders in Korea and those in the India-listed unit over dividends—how much is paid, how it is structured, and how cash is repatriated.

Some in the market argue that if the government tightens rules on dual listings, it should also build safeguards against offshore carve-out IPOs. They say companies seeking access to foreign capital markets should be guided toward alternatives such as ADRs—U.S.-traded depositary receipts that allow American investors to trade an overseas company’s shares indirectly—rather than splitting off and listing key units abroad.