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(Bloomberg) — LG Chem Ltd. shares surged by the most in five years after Palliser Capital UK disclosed a stake in the firm and urged changes, in a sign that overseas activists are starting to wade back into South Korea.
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The stock jumped as much as 14% Wednesday in Seoul, the most since August 2020. It’s up 53% so far this year, following a four-year decline from its 2021 peak.
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LG Chem shares are “chronically undervalued,” James Smith, chief investment officer at the UK-based activist fund, said at the 13D Monitor Active-Passive Investor Summit in New York on Tuesday. The petrochemical and battery material maker should improve its governance and framework for returning capital to shareholders, he added.
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South Korean stocks have been beating global peers this year as the election of President Lee Jae Myung in June breathes new life into an ongoing corporate reform effort. Previous activist campaigns often failed to win change in a country long dominated by family-controlled conglomerates.
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Palliser said it has built a long-term stake of over 1% in LG Chem, and recommends that the company consider selling down its stake in LG Energy Solution to fund a share buyback. LG Chem currently controls 82% of LG Energy after a split-off and listing of the electric-vehicle battery maker in 2022.
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The parent firm has an extreme 74% discount to its net asset value, Palliser said. LG Chem’s market capitalization has shrunk to around $19 billion while its battery unit is now worth $73 billion.
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Attempts to contact LG Chem for comment weren’t immediately successful.
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Local investors see the return of overseas activists as another potential boost for the market after the benchmark Kospi’s 60% surge this year.
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“I think the South Korean public and the government would see the proposal as reasonable,” said Lee Chang Hwan, chief executive officer at Align Partners Capital Management Inc., a Seoul-based activist fund. “People are now aware of shareholders’ rights and global standards,” he added.
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—With assistance from Crystal Tse.
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(Updates with more details, background and comments throughout)
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English (US)