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By Svea Herbst-Bayliss
NEW YORK :Palliser Capital is urging LG Chem, a leading electric vehicle battery supplier, to refresh its board and buy back shares, arguing these and other changes could help its share price more than double.
The South Korean chemical company currently trades at a 73 per cent discount to its net asset value as investors see it more as a struggling petrochemicals company, while dismissing its strong battery business, Palliser’s founder and Chief Investment Officer James Smith said at the 13D Monitor Active Passive Investment Summit in New York.
Despite its strengths, LG Chem shares have lost 20 per cent in the last 12 months and have lagged their peers. “This thing is crazy, crazy, crazy cheap,” Smith said.
Smith blames a lack of trust in LG Chem’s corporate governance and a lack of alignment with shareholders, as well as poor capital allocation for a steep gap between the company’s current $14 billion value and what it should be at $53 billion.
Investors have also criticized its 2020 decision to spin off its battery business into a new company called LG Energy Solutions, which some analysts said had a negative effect on the Korean capital markets more broadly.
While Smith praised recent steps, including the sale of the polarizer business two years ago and the sale of a non-core water filter business this year, he said they are not enough.
The board needs to be refreshed with experts whose skills apply to LG Chem’s sectors in advanced materials, electric vehicles and life sciences. Right now directors are academics who lack business management expertise, as well as capital allocation experience, he said.
Smith is also urging the company to buy back shares as well as continue to monitor and maintain appropriate levels of net debt.
Smith, who spent years working for Elliott Investment Management and spent time in Asia, has previously made investments in Japan including at real estate company Tokyo Tatemono and rail company Keisei Electric Railway.
