Ruling Party Hearing May Delay Korea Exchange's Dual Listing Guidelines

The ruling party will hold a public hearing on dual listing guidelines at the National Assembly on the 25th of this month. The Korea Exchange's planned announcement of dual listing screening guidelines, originally scheduled for this month, is now likely to be delayed amid political discussions. Companies pursuing subsidiary listings face growing uncertainty as the guidelines face delays and potentially stricter regulations.

According to financial investment industry sources and political circles on the 8th, a public hearing to gather industry opinions on dual listings will be held on the 25th, led by the Democratic Party of Korea's "Korea Premium K-Capital Market Special Committee." An official from the office of Rep. Oh Ki-hyung, who chairs the special committee, said, "We are preparing to hold a discussion forum inviting stakeholders related to dual listings to hear their opinions."

The hearing provides an opportunity to formally gather diverse opinions on the dual listing issue. An investment banking industry source said, "Creating guidelines requires a process of thoroughly listening to opinions from various sectors and synthesizing multiple approaches." The Exchange is expected to pursue amendments to relevant detailed rules after gathering additional opinions around the time of the hearing and consulting with financial authorities. Observers note that the originally promised end-of-month guidelines announcement has become virtually impossible. A financial investment industry official said, "The Exchange is closely watching movements in the National Assembly, so it won't be easy to release guidelines before the hearing."

After Essex Solutions, a great-grandchild company of LS Group, withdrew its initial public offering in January amid dual listing controversy, the Exchange had been preparing to announce guidelines within the first quarter. In Essex Solutions' case, clear guidelines became necessary because the dual listing framework was applied even though it was not a business unit spun off from a parent company, but rather a global number-one winding wire company acquired from the United States and grown while remaining unlisted. Despite this, industry voices express concern that the Exchange is failing to serve as a focal point, given the repeated delays in announcing dual listing guidelines.

Some suggest that policy authorities, rather than the Exchange, may directly issue dual listing guidelines. An IB industry source said, "Discussions have progressed to the point where it wouldn't be strange if the Exchange announced immediately," but added, "Since the matter has risen to the policy level, higher authorities may set the direction." One approach being discussed involves the Financial Services Commission setting detailed criteria for listing regulations while the Exchange applies them in its screening process.

According to sources, the dual listing guidelines will reportedly include provisions that in principle prohibit "split listings." Split listings refer to physically spinning off certain business units to establish subsidiaries, then pursuing IPOs. Additionally, when subsidiaries pursue IPOs, the guidelines will reportedly require obtaining consent from parent company minority shareholders. The plan is to create a structure where shareholders directly approve dual listings through special resolutions at shareholder meetings. This is interpreted as an intent to fundamentally resolve conflicts between companies and shareholders, which is considered the core issue in dual listing problems.

The guidelines will also likely include provisions requiring companies to prepare substantive compensation measures for parent company minority shareholders, such as in-kind dividends or preferential allocation of new shares. However, industry consensus suggests policy authorities are demanding even stronger measures.

As the guidelines announcement faces delays and regulations are expected to tighten, companies pursuing listings face deepening concerns. SK is continuing discussions with SK Ecoplant's financial investors regarding listing schedules, and LS is also reportedly in consultation with FIs who invested on the premise of LS MnM's listing. In particular, HD Hyundai Robotics—valued at 8 trillion won and considered one of this year's largest IPO candidates—has made no progress since selecting lead managers.