Activist hedge fund Palliser Capital has publicly called on LG Corp., the controlling shareholder of LG Chem, to support its reform proposals, significantly raising the stakes before the annual general meeting.
At the heart of this conflict is LG Chem's staggering valuation discount. The company's market capitalization is just 34% of the value of its 79.4% stake in its own subsidiary, LG Energy Solution (LGES). This implies a massive ~66% discount, a classic example of the 'Korea Discount' where a parent company is valued far less than its parts. Palliser argues this deep undervaluation, also reflected in a Price-to-Book ratio well below its historical average, stems from poor governance and inefficient capital allocation.
This public appeal is the culmination of a months-long, strategic campaign. Palliser began its public push in October 2025, officially submitted its shareholder proposals in February 2026, and even filed a legal injunction to ensure its proposals would be heard. This step-by-step escalation, supported by local governance bodies, was designed to build momentum and pressure ahead of the shareholder vote.
Furthermore, Palliser's campaign is not happening in isolation; it's bolstered by two powerful external forces. First, the Korean government's 'Corporate Value-up Program' has created a policy environment that encourages companies to improve shareholder returns. Second, a landmark revision to the Commercial Act in February 2026 now mandates the cancellation of repurchased treasury shares, giving real power to Palliser's demand for buybacks and preventing companies from using them simply for management control.
LG Chem has signaled some willingness to change, mentioning plans to use about 10% of proceeds from LGES stake sales for shareholder returns. However, the core of the dispute remains: will the company commit to a clear, verifiable plan to unlock value for all shareholders? The upcoming meeting is therefore a crucial test of whether the momentum for corporate reform in Korea can translate into tangible change at one of its largest conglomerates.
- Net Asset Value (NAV): The total value of a company's assets minus its liabilities. It's often used to gauge if a company is undervalued.
- Korea Discount: A term referring to the tendency for South Korean companies to have lower valuations compared to their global peers, often attributed to issues like complex ownership structures, low dividend payouts, and geopolitical risks.
- Price-to-Book (P/B) Ratio: A financial metric used to compare a company's current market price to its book value. A low P/B ratio can indicate that the stock is undervalued.