LG CNS Stock Falters in Market Debut Amid Political Uncertainty

LG CNS, the IT services arm of LG Group, made its highly anticipated debut on the Kospi on February 5, 2025. However, the stock market reception was less than enthusiastic, with the share price falling below the offering price. This article explores the factors contributing to the decline in LG CNS's stock price and its long-term investment potential.

LG CNS aimed for a peak valuation of 6 trillion won ($4.1 billion) in its initial public offering (IPO), driven by increasing global demand for digital transformation services. The company submitted a securities registration statement to the Korea Exchange in December 2024, with KB Securities, the Bank of America, and Morgan Stanley as major underwriters. LG CNS planned to go public on the main Kospi bourse in February 2025, with a target offering price range of 53,700 won to 61,900 won per share (Lee Jae-lim, 2025).

The decline in LG CNS's stock price during its market debut can be attributed to several factors:

1. Market conditions: The domestic IPO market was influenced by political instabilities and economic challenges, which led to a lack of enthusiasm among international funds. Overseas investors in Hong Kong and Singapore showed interest in the domestic political situation, but many foreign asset managers maintained their willingness to invest despite prevailing conditions (Lee Jae-lim, 2025).
2. Offering existing shares: LG CNS offered existing shares in its IPO, which raised concerns among investors. The company addressed this issue by setting a modest share price lower than the perceived market valuation to alleviate such concerns (Lee Hyun-gyu, LG CNS CFO).
3. Market expectations: The IPO market had been absorbing PEF exit-driven IPOs, maintaining high expectations for successful transactions. However, the IPO of LG CNS did not meet these high expectations, leading to a decline in its stock price (Industry insider).



LG CNS's financial performance has been robust, with consistent revenue and profit growth. In 2023, the company posted revenue of 5.6 trillion won and operating profit of 464 billion won, marking year-over-year increases of 12% and 20%, respectively (Lee Jae-lim, 2025). This growth is driven by the increasing demand for digital transformation services and the company's expanding global business.

Comparing LG CNS's financial performance to its peers in the tech services sector, we find that it has maintained a strong growth trajectory. For instance, Samsung SDS, a leading competitor in the sector, has a price-to-earnings ratio (PER) of around 16 times (Chu, 2025). LG CNS, on the other hand, aims to achieve a PER multiple of over 20 times that of comparable companies to reach a valuation of over 7 trillion won while maintaining last year's profit levels (Unknown, 2025).

The company's impressive financial performance and strategic investments in areas like AI and ERP projects for its affiliates position it well for its upcoming IPO. The strong growth in revenue and profit, coupled with the company's expanding global business, suggests that LG CNS's stock valuation could be justified, given the high demand for digital transformation services and the company's competitive position in the market.

In conclusion, the political instability and economic challenges in South Korea played a significant role in the lukewarm reception of LG CNS's IPO. The company's ability to navigate these challenges and maintain its growth trajectory will depend on its strategic investments and the overall economic conditions in the country and the global market. Despite the initial setback, LG CNS's strong financial performance and growth prospects position it well for long-term investment potential.