Korea to Ban Double Listing of Affiliates to Boost Market Value

iibwd1ut3phzv62pqlvsf8[9_media_dl_1.png Bloomberg

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(Bloomberg) — South Korea is moving to restrict publicly traded companies from listing subsidiaries, aiming to curb a practice long blamed for diluting shareholder value.

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“We will establish solid standards to ensure that the rights and interests of general shareholders are not harmed by the simultaneous listing of parent and subsidiary companies, and we will prohibit duplicate listings in principle through strict screening,” Financial Services Commission Chairman Lee Eog-weon said at an investor meeting in Seoul Wednesday.  

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“Double listings” tend to depress holding‑company shares and are widely seen as a structural cause of Korea’s chronic equity undervaluation, known as the “Korea discount.” By banning them, the government aims to lift market value and narrow the gap with global peers.

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The move is also part of President Lee Jae Myung’s broader push to modernize governance and restore confidence in capital markets. Such measures fueled a stock rally that ranked among the world’s best last year, but momentum has stalled since the Iran war, with investors seeking fresh catalysts.

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Korean stocks extended gains on Wednesday, with Samsung Electronics Co.’s shareholder meeting also adding momentum. The Kospi Index rose as much as 4.6%. 

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“Conglomerates have repeatedly spun off their best divisions and taken them public through IPOs,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global. Such moves “create dilution and prevent the value of the existing company from rising.”

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Many chaebols have relied on affiliate IPOs for fundraising. But with new rules restricting affiliate listings, fewer strong business units are likely to be spun off into separate firms, he said. 

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Read: A $1.7 Trillion Stock Rally Fails to Wipe Out ‘Korea Discount’

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Shares of holding companies including CJ Corp. and SK Inc. rallied earlier this week after local reports on the proposal. The measure may affect IPO plans for affiliates at major chaebols such as SK, HD Hyundai, and Hanwha Group. 

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LG Energy Solution’s 2022 IPO is often cited as a case in point. LG Chem Ltd. spun off the fast-growing battery unit at the height of the electric-vehicle boom, after which the parent’s shares fell about 9% in the following month before entering a prolonged decline. 

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The new rules will push companies to rethink long‑term financing strategies, said Dilin Wu, a research strategist at Pepperstone Group. 

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For now, investors appear to be focusing “on the valuation premium that better governance can bring rather than the temporary loss of an IPO window,” Wu said.

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