[Edaily Marketin JI YEONG-EUI Reporter Park So-young] K-Beauty company Gudai Global, which is aiming for a “10 trillion won valuation,” is pursuing a “reverse listing” strategy in which it will list its subsidiary on the stock market before its parent company. Since dual-listing regulations require stricter shareholder protection procedures for initial public offerings (IPOs) of subsidiaries by listed parent companies, the company’s calculation is that by listing the subsidiary first—thereby opening a channel for financial investors (FIs) to recoup their investments—and then listing the parent company, it can effectively circumvent the regulations. Market observers point out that this could amount to a “loophole listing” that circumvents the intent of the dual-listing regulations simply by reversing the listing order.

According to an E-Daily report on the 12th and sources in the investment banking (IB) industry, Gudai Global is reportedly reviewing internally a plan to proceed with the IPO of its subsidiary, Craver Corporation, before that of the parent company. Craver is a cosmetics company that operates “Skin1004”; it has established a local subsidiary, Craver Holdings, for its listing in Japan and has completed the “flip” (headquarters relocation) process. It is currently pursuing a listing on the Tokyo Stock Exchange (TSE).

Previously, Gudai Global had also considered acquiring the financial investor (FI) stakes in Craver to make it a wholly-owned subsidiary; however, it is now giving greater priority to a “reverse listing” plan—in which Craver would go public first—and is reevaluating its structure for handling dual listings.

“No ordinary shareholders to protect when the parent company is unlisted”: Sophisticated calculations exploiting regulatory loopholes

The decision to reverse the order of the parent-subsidiary listings stems from stricter dual-listing regulations and the exit issues faced by subsidiary financial investors (FIs). Gudai Global has successively incorporated Craver, Seorin Company, and Skin Food as subsidiaries through aggressive mergers and acquisitions (M&A), investing jointly with external financial investors (FIs) during the acquisition process. Investors such as The Turning Point and Mirae Equity Partners participated in Craver, while Company K Partners remains an investor in Seorin Company and The Ham Partners in Skin Food.

Six firms—including IMM Private Equity (PE), Premier Partners, IMM Investment, Kiwoom PE, JKL Partners, and Company K Partners—have participated as investors in convertible bonds (CBs) totaling 800 billion won for the parent company, Gudai Global. Under this structure, if the parent company goes public first, the subsequent IPO of its subsidiary would be subject to dual-listing regulations, potentially making the recovery of these investors’ capital uncertain.

Consequently, the company appears to be pursuing a plan to first list the subsidiary on the stock market to secure an exit route for the financial investors (FIs), followed by the listing of Gudai Global itself. Gudai Global is also well advanced in its IPO preparations. Initially, the company had planned to file for a preliminary review for a KOSPI listing during the third quarter of this year, with the aim of listing in early 2027, and recent preliminary consultations have been held with the underwriting syndicate and the Korea Exchange’s Main Market Division. Mirae Asset Securities is serving as the lead underwriter, with NH Investment & Securities, Citigroup Global Markets Korea, and Morgan Stanley participating in the underwriting syndicate. Market estimates suggest that Gudai Global’s enterprise value could reach around 10 trillion won.

The core rationale behind the reverse listing being considered by Gudai Global is to “list the subsidiary first at a time when there are no common shareholders of the parent company who need to be protected.” The dual-listing standards established by the Financial Services Commission and the Korea Exchange impose five major obligations on the parent company’s board of directors when the parent lists a subsidiary: conducting a shareholder impact assessment, devising shareholder protection measures, confirming shareholder opinions, passing a board resolution for or against the listing, and disclosing relevant details. These requirements also apply when a subsidiary is listed on an overseas exchange. The relevant exchange regulations took effect on the 3rd.

Conversely, if Gudai Global had been an unlisted company at the time of Craver’s initial listing, there would be no general shareholders of the parent company eligible for protection. Investors participating in Gudai Global’s subsequent public offering would do so with full knowledge that Craver is already a listed company and with an understanding of the group’s corporate governance structure. The internal rationale is that the sequence of events leading to the erosion of shareholder value differs fundamentally from the traditional “listed parent company → unlisted subsidiary IPO” model.

Consequently, by reversing the listing order, the company can proceed with both the recovery of investment funds by the subsidiary’s financial investors and the IPO of the parent company, Gudai Global, while effectively circumventing the special review for duplicate listings and shareholder protection procedures required for a subsidiary’s IPO when the parent company is listed first. This is why observers assess that Gudai Global’s consideration of a subsidiary-first listing is driven by the need to address duplicate listing regulations.

The Pitfall of an Early M&A Subsidiary Listing Immediately Before the Parent Company’s Listing

This assessment is further supported by the recent emergence of the first case in which a duplicate listing was exceptionally permitted. On the 20th of last month, the Korea Exchange (KRX) approved the preliminary screening for KOSDAQ listings of Deoksan Nepcore, a subsidiary of Deoksan Hi-Metal, and DTS, a subsidiary of Dasan Networks. After undergoing an impact assessment on parent company shareholders and shareholder protection procedures, the two companies became the first exceptions approved since the principle prohibiting duplicate listings was established.

However, the case of Gudai Global differs significantly from these previous examples. Duksan Hi-Metal entered the stock market in 2005 and Dasan Networks in 2000, meaning more than 20 years have passed since their parent companies’ initial listings. Duksan Nepcores is a defense company that Duksan Hi-Metal acquired from an external source in 2021, and DTS was also acquired by Dasan Networks in 2013 and incorporated into the group. There is a significant time gap between the parent company’s listing and the subsidiaries’ listing efforts, and the subsidiaries have operated independently for a long period since their incorporation into the group. Dasan Networks was listed on KOSDAQ on June 22, 2000.

In contrast, Gudai Global follows a structure in which subsidiaries acquired through M&A in recent years are listed first, immediately prior to the parent company’s IPO. If the listing dates of the parent company and its subsidiaries are very close together, it could be perceived as a deliberate reordering of listings to avoid duplicate listing regulations, rather than a natural IPO for a subsidiary that has grown independently over a long period.

Is an overseas listing a blind spot for regulatory oversight?… Obstacles to the parent company’s review due to the amended Commercial Act and breach of fiduciary duty risks

The fact that Craver is listing on the Japanese stock market is another variable. The Korea Exchange (KRX) faces limitations in directly prohibiting Craver’s IPO, which is taking place on a Japanese exchange. However, if Gudai Global first lists on the domestic stock market and then lists Craver overseas, the five major obligations of the parent company’s board of directors under current dual-listing regulations apply equally to the overseas listing. In particular, the Commercial Act, amended last year, expanded the scope of directors’ fiduciary duties to include not only the company but also shareholders, and explicitly stipulated the protection of the interests of all shareholders and the fair treatment of all shareholders. Consequently, some point out that if a decision is made to list a subsidiary without sufficient shareholder protection measures, it could lead to allegations of a breach of directors’ fiduciary duties, liability for damages, and, depending on the circumstances, even controversy over breach of trust.

Listing the subsidiary first could largely avoid these issues, but conversely, it could create a burden for the listing review of Gudai Global itself. This is because it is difficult to rule out the possibility that the exchange will scrutinize the circumstances surrounding the change in listing order, corporate governance, and investor protection issues to determine whether there was, in effect, an intent to circumvent regulations. In particular, the shorter the time gap between the subsidiary’s listing and the parent company’s listing, the greater the potential for controversy over a so-called “loophole listing.”

The market is concerned that if the Gudai Global case is permitted, other unlisted companies may adopt similar strategies. This is because companies planning a parent company IPO could, while still unlisted, first list their subsidiaries one after another and then list the parent company last, thereby effectively circumventing the dual-listing regulations—which were introduced to protect the general shareholders of the listed parent company. Critics point out that the intent of the system—which prohibits dual listings in principle and allows them only in exceptional cases—could be undermined by altering the order of listings.

A senior official in the private equity fund (PEF) industry noted, “It appears to be an attempt to prioritize helping subsidiaries’ financial investors (FIs) secure their exits before uncertainty sets in, but as similar cases accumulate, authorities will inevitably find fault with them, raising concerns that this could hinder the parent company’s listing.”

Whether Gudai Global’s reverse listing plan will actually be implemented is expected to depend on Craver’s pre-listing schedule and the outcome of consultations with the stock exchange and financial authorities. If the subsidiary’s IPO is brought forward, it is likely that the schedule for Gudai Global’s application for a preliminary review for its KOSPI listing—originally planned for the third quarter—will also have to be adjusted.

A Gudai Global official stated, “It is difficult for the company to comment on unconfirmed matters related to the listing in accordance with the Capital Markets Act and other relevant laws,” adding, “We plan to proceed with the listing method after thorough consultation in accordance with government policies and guidelines.”