This article was published on July 31, 2025, at 4:39 p.m. on the ChosunBiz MoneyMove site.
SK Innovation's battery subsidiary SK On is shaking off pressures regarding its initial public offering (IPO) and is preparing for a new stage. It plans to buy back all convertible preferred shares (CPS) held by financial investors (FI) for 3.6 trillion won, clarifying complex equity relationships, and improve SK On's financial structure by attaching the valuable subsidiary SK EnMove.
With the relationship with FIs now sorted, SK On no longer has an immediate obligation to go public. This also resolves the controversy over dual listings between the parent and subsidiary. However, the need for an IPO hasn't entirely disappeared. To manage annual capital expenditures (CAPEX) reaching trillions of won and repay the 5 trillion won investment from MERITZ Securities, a long-term push to go public seems inevitable. Industry insiders estimate that SK On will likely first build its strength and enhance its corporate value before knocking on the door of the U.S. stock market.
◇ Although the urgent issue has been resolved... Annual trillions of won in CAPEX require going public to manage
On the 31st, according to the investment banking (IB) industry, SK Innovation held a board meeting the previous day and decided to repay the investment in SK On by FI early. It agreed to repay 2.8 trillion won raised from the MBK Partners consortium and Korea Investment & Securities PE consortium in 2023, and to buy back 51,079,105 shares of SK On CPS for a total of 3.5881 trillion won.
Additionally, the merger proposal between SK On and SK EnMove passed the board. Once the merger of the two companies is completed, SK Innovation will own over 90% of the merged entity SK On and SK EnMove.
Through this merger and the purchase of convertible preferred shares (CPS), SK On is temporarily relieved from its obligation to go public. According to existing contracts with FIs, SK On was required to complete its IPO by 2026 to allow the FIs to recover approximately 3.5 trillion won.
This condition was to meet an internal rate of return (IRR) of 7.5%, and if it failed to meet this obligation, FIs had the drag-along rights to sell SK's equity to a third party. With SK's decision to buy back all the shares from the FIs, this qualification for a qualified listing (Q-IPO) has been eliminated.
However, this only resolves the immediate issue; SK On eventually faces the necessity of raising funds through an IPO. The annual CAPEX required for factory investments is too high. SK On's CAPEX was about 7.5 trillion won last year and is approaching 3.5 trillion won this year. Despite efforts to significantly reduce CAPEX, its net debt exceeds 23 trillion won.
The 2 trillion won being raised from MERITZ Securities using PRS is also a debt that eventually needs to be repaid. Although it was raised through PRS to avoid being recognized as a liability, given that the funds were lent due to SK Innovation's credit, it essentially carries the nature of a liability.
The structure involves SK Innovation transferring its shares of SK On to MERITZ Securities and later repurchasing them. In return, SK pays MERITZ Securities an interest rate of 5.3%. This effectively has a similar effect to MERITZ Securities indirectly holding SK Innovation's corporate bonds.
◇ Considering the weight of U.S. investments and business, a New York listing is advantageous
IB insiders familiar with SK On's internal circumstances believe that from a long-term perspective, there is a high possibility that SK On will pursue a listing in the United States. If SK On is separately listed domestically in the future, it will spark dual listing controversies, but listing in the U.S. could alleviate that risk.
The industry also notes that SK On's business structure has a disproportionately high concentration in the North American market. SK On operates large-scale battery joint ventures with Ford and Hyundai Motor Group in Georgia, Kentucky, and elsewhere in the U.S. An IB industry insider stated, 'Just as Hyundai Motor listed its Indian subsidiary on the local stock market, it is natural for SK On, which has significant exposure to the U.S., to raise funds there.'
Moreover, if it lists on the domestic securities market, it will inevitably lead to a dilution of investment demand with the already listed competitor LG Energy Solution. In contrast, a U.S. listing could minimize such risks. The New York stock market has companies listed across the entire electric vehicle value chain, from EV manufacturers to batteries, materials, and recycling, but the investor base is far broader compared to Korea.
As a result, analysts suggest that if SK On targets the New York stock market, it could strengthen its position in the global battery ecosystem and likely receive a fair valuation in the market. Furthermore, from the perspective of the efficiency of raising funds in U.S. dollars (currency risk management) and enhancing global recognition, a U.S. listing is advantageous.
An industry insider noted, 'Since SK On has already invested significantly in the U.S., the thought of going public there rather than in Korea has been in place from the start.'
He added, 'While stating there are no immediate plans for an IPO may be true considering SK On's operational and financial situations, it ultimately needs to continuously raise funds to survive, so an IPO will be necessary eventually.' He mentioned that while cash flow from EnMove will be utilized, future overseas listings are also worth considering.
The market believes that SK On is likely to secure the fundamental strength for an IPO after improving its performance and that it will attract pre-IPO investments to enhance its corporate value, subsequently pursuing a direct listing in the U.S.
Some in the industry analyze that SK On's parent company, SK Innovation, could additionally raise funds and provide them to SK On again or that the controversy over dual listings may subside, allowing for a domestic listing to be pursued again.
An IB insider stated, 'Although there is currently fierce controversy over dual listings in the domestic capital market, the situation can change at any time in the future.'
However, the slowdown in global electric vehicle demand and the sudden surge in supply of Chinese batteries leading to price declines are variables. The critical question is when SK On will decide the timing for an IPO or additional fund raising while adjusting its production rates for profit improvement.