South Korea’s SK Hynix launches US$28 billion US listing to ride global AI wave
The company will sell 17.79 million new shares in Nasdaq depository receipts
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[NEW YORK] South Korean chipmaker SK Hynix on Monday (Jul 6) launched a US share sale to raise 43 trillion won (US$28.07 billion), the company said, as it capitalises on the global AI boom with one of the world’s largest new share sales.
The company will sell 17.79 million new shares in the American Depositary Receipts (ADRs) listing on the Nasdaq. Ten ADRs will represent one common share and the stock will be sold in a price range that is due to be revealed on Monday, based on SK Hynix’s Seoul trading price.
The deal comes as Asian chip companies tap strong global demand for AI-related stocks. Taiwan’s Unimicron Technology is also seeking to raise about US$1.4 billion through a sale of global depositary shares, or shares listed overseas that represent its local stock.
SK Hynix’s shares ended on Monday down 3.4 per cent at 2,343,000 won, but the stock is still up about 260 per cent this year. South Korea’s Kospi was down 0.5 per cent on Monday.
Memory chip stocks have been volatile in recent sessions due in part to renewed investor concerns about how long the boom would last.
“We are in the midst of a memory super cycle, with all three major suppliers – Samsung, SK Hynix, and Micron – riding the AI driven demand wave,” said Di Zhou, portfolio manager at Santa Fe, New Mexico-based Thornburg Investment Management with US$60 billion in assets. It owns SK Hynix’s Korean ordinary shares.
She added that SK Hynix’s ADR listing was positive because it would broaden the company’s investor base and potentially narrow its valuation gap with US rival Micron.
“While market volatility has been quite high recently, I would expect demand for SK Hynix shares to remain relatively robust,” said Albert Yong, a managing partner at Petra Capital Management.
South Korea last week unveiled a sweeping industrial strategy centred on semiconductors and AI, including a US$576 billion chip investment programme in the country’s southwest to help spread returns from the boom.
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SK Hynix and Samsung Electronics will anchor the investment programme, the government said.
South Korean President Lee Jae-myung on Monday ordered officials to move quickly to get to work on major chip and AI projects announced last week.
He warned that delays in permits, land acquisition, and securing power and water supply could undermine the country’s bid to dominate advanced industries.
Memory inflation
SK Hynix has been among the world’s largest beneficiaries of the AI fervour as it outperformed its major rivals Samsung and Micron.
“This is more than a liquidity event,” said Dave Mazza, the chief executive officer of Roundhill Investments in New York, which manages an exchange-traded fund tracking DRAM manufacturers, which is one of the most popular ways for US investors to trade SK Hynix’s stock. “SK Hynix has been one of the most important companies in the world that most US institutions could not easily own.”
“The listing removes an accessibility discount, not a quality discount.”
Steve Sosnick, chief strategist at Connecticut-based Interactive Brokers, said individuals and smaller institutions would benefit from the US listing, rather than large investors.
“The new listing will make it easier for capital-hungry Hynix to directly access a new group of momentum-hungry investors,” Sosnick said.
SK Hynix said the proceeds from the listing of the ADRs will be used to build chip factories in South Korea and buy chipmaking equipment including an extreme ultraviolet scanner made by Dutch equipment maker ASML.
The final price of the New York listing is due to be set on Thursday, ahead of the stock starting trade on Friday, regulatory filings showed. The company’s management will meet global investors on a roadshow this week.
The deal is expected to be the second-biggest share sale after a record US$85.7 billion initial public offering by SpaceX last month, surpassing Saudi Aramco’s US$25.6 billion IPO in 2019 and Alibaba’s similar-sized offering in 2014.
Some investors were cautious that memory “inflation” would dent spending on AI infrastructure, mobile phones and PCs.
“We expect better access, but timing of the memory cycle is equally important,” said Sundeep Gantori, Standard Chartered’s chief investment officer of equities. “We believe memory cycle is beyond the early phase and now in the mid-cycle stage.”
SK Hynix is a key supplier of high-bandwidth memory chips used in AI systems by customers such as Nvidia and Alphabet’s Google.
SK Hynix is expected to join the chip-heavy Philadelphia SE semiconductor index, analysts said, helping pave the way for a surge in passive investments.
Last month, HSBC said it would raise its valuation of SK Hynix by applying a 20 per cent premium to its previous price-to-book multiple of 2.8 times, implying a multiple of 3.4 times, “reflecting more proactive shareholder-friendly initiatives and improved accessibility to global investors.” REUTERS
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