Lotte Accelerator, a company set up under South Korea’s large conglomerate Lotte Group to support startups, has decided to issue new shares in an attempt to lower the group owner’s holding ahead of tougher state regulation on internal trade.

According to the investment bank industry on Thursday, Lotte Accelerator is seeking to issue new shares worth 10 billion won ($8.8 million) to financial investors (FI) such as private equity funds. If the company successfully sells new shares to outside investors, Lotte Group Chairman Shin Dong-bin’s stake in the company would fall below 20 percent.

Lotte Accelerator was set up in 2016 with initial investment of 15 billion won in which Shin contributed 5 billion won. Under its L-CAMP program, it offers startups 20 million won to 50 million won funding as initial investment, six-month mentoring service and office space. It also helps them draw investment from Lotte Group or venture capital firms. So far, 30 startups have benefitted from the program.

But recently the company has been embroiled in an internal trade controversy after it has rented out office space to its sister company Lotte Shopping Co. Under Korea’s fair trade law, unlisted companies in which the owner family member holds 20 percent or more, or listed companies with owner family’s shares of 30 percent or higher come under scrutiny for internal trade. Currently, Chairman Shin’s stake in the company exceeds 30 percent.

“The company seems to aiming to avoid the controversy on its internal trade by upping holding by outside investors that in return could lower the owner’s stake below 20 percent,” said an unnamed source from the investment bank industry.

By Kang Doo-soon and Han Woo-ram

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]