The share price of LG Energy Solutions, which rose to 600,000 won just two months ago, has dropped to 400,000 won. As the choppy stock market continues, the issue of slowing demand for electric vehicles from Tesla has driven the stock price down to this point.
Concerns have emerged that if EVs sell for less, negative effects on secondary battery performance would be inevitable. Heading into the first anniversary of the listing (January 27), share prices are still falling as short selling focuses on the possibility of a decline in the share price due to overhang fears (potential selling volume).
He was the leader of the stock market. A sudden turn of events in two months due to the “Tesla Shock”
According to the Korea Exchange on the 8th, LG Energy Solutions closed at 444,000 won on the 6th. It was up 2.42% from the battlefield, but still remains in the 400,000 won range. This is 48% higher than the public offering price (300,000 won).
LG Energy Solutions was a major player in the domestic stock market last year. To be precise, it was a year in which the rally in ‘secondary battery’ stocks led by LG Energy Solutions stood out. The bear market rally continued as the benefits of the US Inflation Reduction Act (IRA) added to the booming global EV market.
The gist of the IRA is that it provides subsidies only for electric vehicles manufactured in North America. Expectations have risen that if demand for EVs in the United States recovers supported by subsidies, battery orders will increase, which will lead to the growth of LG Energy Solutions, a representative secondary battery company. This is the background that has allowed LG Energy Solutions to reach its peak for the whole year, rising to 629,000 won, more than double the price of the public offer (300,000 won) on November 11 last year.
However, in the last two months alone the situation has reversed, with a drop of 27% from the peak. It is an analysis that the “Tesla shock” worked as a direct hit. Since last year, signs of slowing demand for Tesla in China have been seen everywhere. The unconventional discount policy that has been in place since September last year is one of them. On the 6th, Tesla also lowered the selling price in China. It can be interpreted as a struggling situation due to sluggish demand.
The reason why Tesla, which had its nose turned up at overflowing demand, changed its attitude towards lowering vehicle prices because sales in China are not the same as before. At the end of the year, it was reported that the Shanghai plant was closed during the Christmas period, which was unusual, and that production was reduced. Indeed, in December last year, deliveries of new cars made in China decreased by 44% compared to the previous month and by 21% compared to the same period last year.
Possibility of further price adjustments
Tesla shares are also down nearly 40% in the past month on concerns about sluggish demand. On the 6th (local time), it fell to 101.81 during the intraday, and $ 100 was also threatened. Tesla’s stock price crash has led to a drop in investor sentiment in the secondary battery industry as a whole. The downtrend has steepened as short sellers have focused on the possibility of further declines in share prices.
On the 27th of this month, there are comments that stock prices may be further adjusted when stock protection is lifted. In the turmoil of the stock price, individual investors are in a state of “mental collapse”. It is said that it will not fall below the public offering price of 300,000 won. Mr. Kim (46), an employee who has invested in LG Energy Solutions, told the reporter, “Isn’t it going below 300,000 won like this?”
The ratio of employee shares to the total number of listed shares of LG Energy Solutions was 3.39% in September last year. It is 23% of the effective volume of distribution. That’s because LG Chem, the largest shareholder, holds a whopping 82%. As a result, there is also an analysis that a larger supply-demand shock is expected than other IPO companies.
Koh Gyeong-beom, researcher at Yuanta Securities, said, “The company’s equity holding relative to the actual distribution volume is 23.1%. The average of the previous major IPO is 9.0%, exceeding the highest level of 20.1% of Hyundai Heavy Industries. %.” It is believed that the demand-supply shock will be greater than the case.” In particular, as interest rates on loans have risen sharply due to interest rates, the incentive for employees to sell has increased.
LG Energy Solutions employees say that “the interest is too much”. An employee of LG Energy Solutions said, “Because I recently saw 600,000 won, there are many regrets.”
when is the rebound?
However, slowing demand for EVs and concerns over the overhang and inventory pullbacks are thought to be a bit overreflected. Rather, the stock market expects stock prices to rebound around March when the US IRA Itemized Enforcement Ordinance is finalized. As of the announcement of the guidelines, battery makers were also thought to benefit from increased demand for electric vehicles in the United States, which had been delayed due to tax credit uncertainty.
Shinhan Investment & Securities has forecast that the electric vehicle market in the United States will increase significantly from 800,000 units last year to 1.4 million units this year. This is an especially good analysis for LG Energy Solutions, which has “Ultium Cells,” a joint venture with General Motors (GM) of the United States. Jeong Yong-jin, researcher at Shinhan Investment & Securities, said, “GM, which was outside the top 10 by sales volume in the global EV market, will be able to expand EV sales this year. in the United States”.
LG Energy Solutions started mass production of the first Ultium Cells plant in Ohio in November of last year. The second plant in Tennessee is expected to be commissioned in the second half of this year. Currently, we have begun construction of our third plant in Michigan and are evaluating the possibility of building a fourth plant to expand production capacity. Kang Dong-jin, a researcher at Hyundai Motor Securities, predicted, “With the full-scale operation of the Ultium Cells 2 plant from the second half of the year, sales in the United States will expand further.”
Park Jin-soo, a researcher at Shinyoung Securities, said, “As there is not much data to show the recovery in demand for EVs, it will be difficult to see a notable rebound right away.”
“Of the batteries supplied by LG Energy Solutions to Shanghai Tesla, the share of domestic consumption in China is lower than expected at 30%, and there are a lot of exports to Europe at this point, so the damage the company will receive from the Chinese The The issue is expected to be more limited than expected: “The problem of slowing demand for electric vehicles in China will continue for the time being, but it will be sufficiently solved if the US IRA takes advantage of it or European demand supports it,” he said.
Reporter Shin Hyun-ah, Hankyung.com [email protected]
