SK Hynix raises US$26.5 billion in US offering after pricing ADRs at US$149

[SEOUL] South Korea’s SK Hynix priced its American Depository Receipts at US$149 on Thursday (Jul 9), raising about US$26.5 billion, a regulatory filing showed on Thursday, highlighting strong investor appetite for a pivotal chipmaker in the AI supply chain.

The share sale decision comes as the company leverages its position as the leading supplier of high-bandwidth memory chips, a critical component for the advanced processors powering global artificial intelligence systems.

Demand for SK Hynix’s US share sale was more than seven times available shares, another person familiar with the matter said, underscoring huge investor appetite for a pivotal company in the AI supply chain.

SK Hynix declined to comment on the pricing and the demand for shares. The person declined to be identified as details of the share sale were confidential.

It will start trading on Friday under the ticker symbol “SKHY” on Nasdaq. It had referenced a per share price of 242,500 won per ADR, based on the Jul 3 closing price in Seoul. On Thursday, the stock closed at 2,186,000 won and ten ADRs represent one common share.

The offering from the South Korean chipmaker will finance new factories and equipment to meet surging AI chip demand.

In addition to bringing in funds, SK Hynix’s US listing is expected to help narrow its valuation gap with US rival Micron, which despite having less market share in key memory products, has benefited from direct access to the world’s largest pool of investors.

Micron trades at a 12-month forward price-to-earnings ratio of 6.66 times versus SK Hynix’s 5.5 times.

“SK Hynix leads on share and Nvidia proximity, Micron competes on power efficiency, US positioning, and momentum from third place,” said Daniel Newman, CEO of tech research firm Futurum ​Group.

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Meanwhile, SK Hynix continues to battle its domestic rival, Samsung, for chip supremacy. Samsung Electronics remains the world’s largest memory chipmaker by volume.

Huge share gains reflecting surging earnings

SK Hynix has made its fortune by becoming the most sought-after supplier of high-bandwidth memory chips, a culmination of 14 years of bets that brought it skepticism and scorn but ultimately put it at the centre of the global AI gold rush.

“As long as there is demand for graphic processors and AI data centres, SK Hynix is indispensable,” said Yoo Hoi Jun, an electrical engineering professor at the Korea Advanced Institute of Science & Technology.

Nvidia CEO Jensen Huang said last month SK Hynix would continue to be the US AI chipmaker’s largest partner, adding that the current memory chip shortage would persist for a few years due to strong demand.

Though shares in semiconductor companies globally have lost momentum in recent weeks, companies like SK Hynix and rival Samsung Electronics are sitting on historic gains as insatiable demand for computer chips to power AI data centres has sent profits soaring.

“AI demand keeps inflecting, currently driven by mostly by strong datacenter CPU demand. HBM demand also remains strong: we expect the market to grow from about US$65 billion this year to US$120 billion next year and about US$290 billion by 2030,” said Rolf Bulk, Head of Semiconductors and Infrastructure, Futurum Equities.

SK Hynix shares closed up 5 per cent on Thursday but have dropped by a quarter in the last two weeks. Even so, the stock is up 680 per cent for the past 12 months.

As dizzying as that long-term share jump has been, the shares have not outpaced massive gains in profits — earnings so huge that each employee is expected to get an annual bonus of about US$574,500, making them highly sought-after marriage partners.

Tellingly, the firm’s 12-month forward price-to-earnings ratio has dropped, with its current level of 5.5 times down from 7.9 times at end-October.

“SK Hynix holds the edge in production scale and maturity. Across the board, since demand is far outweighing supply, they have had tremendous pricing power,” said Ken Mahoney, CEO of Mahoney Asset Management.

“So, generally speaking, their first mover advantage is and was their strength.”

Trade begins on Friday

The ADRs will start trading on the Nasdaq ​on Jul 10. Bank of America, Citigroup, Goldman Sachs and JPMorgan are the underwriters. The company’s primary listing will remain in Seoul.

SK Hynix has said Baillie Gifford Overseas, investment funds managed by Coatue Management and Situational Awareness Partners have each ​indicated interest in purchasing up to a combined US$7 billion of its US ADRs.

Lee Min Hee, an analyst at BNK Investment & Securities, said that contrary to some market expectations, he did not expect SK Hynix’s US listing to result in a major boost to its local shares.

Domestic companies still need to contend with the so-called Korea discount — the tendency for them to trade at lower valuations due to concerns about corporate governance, he said. REUTERS