South Korea's Financial Services Commission announced dual listing guidelines on the 6th, requiring Hyundai Motor, Kia, and Hyundai Mobis to fulfill shareholder protection duties if Boston Dynamics pursues a Nasdaq listing. The three companies each hold at least 20% of HMG Global, which owns 55% of Boston Dynamics. Non-compliance could result in fines up to 1 billion won and one-day trading suspension under Korea Exchange rules. The guidelines aim to protect domestic shareholders when subsidiaries of Korean-listed companies list on foreign exchanges.
Hyundai Companies Face Five Shareholder Protection Obligations for Boston Dynamics Nasdaq Listing
Under the dual listing guidelines, if Boston Dynamics proceeds with a Nasdaq listing, Hyundai Motor, Kia, and Hyundai Mobis must fulfill five mandatory duties: shareholder impact assessment, shareholder protection measures, shareholder consent confirmation through communication or voting, board resolution with notification to subsidiary, and public disclosure including rationale if voting was not conducted. The guidelines apply even when subsidiaries list on foreign exchanges, not just domestic markets.
Hyundai Motor Group's actual ownership structure shows Hyundai Motor, Kia, and Hyundai Mobis each holding stakes in HMG Global, which in turn owns 55% of Boston Dynamics. Additionally, Jung Euisun, chairman of Hyundai Motor Group, holds a 22.5% stake in Boston Dynamics as a domestic resident. Hyundai Glovis holds a 10% direct stake in Boston Dynamics but is excluded from shareholder protection obligations under the guidelines.
Violating Article 78-2 of the Korea Exchange listing rules (Special Provisions on Listing of Subsidiaries) could result in penalties of up to 1 billion won in sanctions (listing contract penalty) and one-day trading suspension. Ko Young-ho, head of the FSC's capital markets division, stated on the 6th that "when a subsidiary lists on a foreign exchange through dual listing, the company must receive approval from the FSC for the securities registration statement before proceeding with the IPO."
Boston Dynamics May Need to File Securities Registration Statement with Korean Authorities
According to regulations on securities issuance and disclosure (Article 2-2-2, Paragraph 1, Item 2), if a foreign corporation's issued shares are 20% or more owned by a domestic resident as of the end of the most recent fiscal year, and that corporation issues securities overseas under conditions allowing domestic residents to acquire those securities at issuance or within one year, the corporation must submit a securities registration statement to the FSC.
In Boston Dynamics' case, domestic resident Jung Euisun holds 22.5% of the company. If Boston Dynamics lists on Nasdaq, domestic residents could purchase its shares through securities firms' home trading systems (HTS) or mobile trading systems (MTS). Whether such stock trading constitutes "acquisition of securities by domestic residents" remains subject to interpretation.
A precedent exists with Webtoon Entertainment, which submitted securities registration statements to both the U.S. Securities and Exchange Commission and Korean financial authorities when listing on Nasdaq in June 2024. Webtoon Entertainment is a U.S. company with Naver, a Korean-listed company, as its largest shareholder (60.6%). Given this precedent, Boston Dynamics would likely need to file a securities registration statement with the FSC if pursuing a Nasdaq listing.
ADR Issuance Could Trigger Future Guideline Updates
Attention is focused on cases where companies with Korean-listed firms or business owners as largest shareholders pursue U.S. stock listings through American Depositary Receipt (ADR) issuance. ADRs allow non-U.S. companies to have a portion of their domestically issued shares held by U.S. depositary banks, then issue certificates based on those shares for listing on U.S. exchanges, enabling local investors to trade in dollars.
The dual listing guidelines currently apply only to direct subsidiary listings. However, the FSC plans to update the guidelines every six months. If the FSC determines ADR issuance to be a "loophole," the possibility of adding related provisions to the dual listing guidelines cannot be ruled out.
Kakao Mobility, in which Kakao holds a 57.2% stake, is reportedly considering a Nasdaq listing through ADR. Kakao Mobility recorded revenue of 739.3 billion won last year, accounting for 9% of Kakao's consolidated revenue of 8.0991 trillion won, making it one of the major subsidiaries. This situation has sparked dual listing controversy.
FAQ
What did South Korea's Financial Services Commission announce on the 6th regarding dual listings?
The Financial Services Commission announced dual listing guidelines establishing shareholder protection requirements for Korean-listed companies whose subsidiaries pursue overseas listings. The guidelines specifically apply to cases like Hyundai Motor Group, where multiple domestic listed companies hold significant stakes in a subsidiary planning a foreign exchange listing.
Why must Hyundai Motor, Kia, and Hyundai Mobis fulfill shareholder protection duties if Boston Dynamics lists on Nasdaq?
The three companies must fulfill shareholder protection duties because they each hold at least 20% stakes in HMG Global, which owns 55% of Boston Dynamics. Under Korea Exchange listing rules Article 78-2, this ownership structure triggers five mandatory obligations to protect domestic shareholders, even when the subsidiary lists on a foreign exchange rather than domestically.
