Seoul: South Korean chip giant SK hynix Inc. is poised to make a significant leap into the global market with its debut on the tech-heavy Nasdaq on Friday. This move marks a substantial new fundraising channel and broadens access for international investors eager to tap into the rapidly expanding artificial intelligence (AI) infrastructure sector.
According to Yonhap News Agency, SK hynix, the world's second-largest memory chipmaker, aims to raise approximately 40 trillion won (US$26.5 billion) through the listing of its American depositary receipts (ADRs) on Nasdaq. The offering includes 177.9 million ADRs, each priced at $149, with each ADR representing one-tenth of a Seoul-listed common share. This listing is anticipated to be one of the largest U.S. equity offerings by a foreign entity, coming second only to SpaceX, highlighting the robust interest from global investors in companies driving the AI revolution.
Beyond a significant capital boost, the Nasdaq listing is expected to enhance SK hynix's long-term fundraising capabilities by improving its global valuation and expanding its reach into international capital markets. "The SK hynix ADR listing is significant because it gives U.S. and global investors who do not have direct access to the South Korean stock market an opportunity to invest in the world's leading high bandwidth memory supplier," remarked an industry official, who wished to remain anonymous.
SK hynix has established its dominance by pioneering in high bandwidth memory (HBM), positioning itself as a key supplier to Nvidia Corp. amid rising demand for AI accelerators. This strategic move has resulted in record earnings and allowed the company to surpass its rival, Samsung Electronics Co., becoming South Korea's most valuable listed entity by market capitalization for the first time in 25 years.
SK Group Chairman Chey Tae-won highlighted earlier this year that the ADR listing would aid in transforming SK hynix into a "more global company" by broadening its shareholder base to include U.S. and other international investors. During the Nasdaq listing ceremony on Friday, Chey and senior executives are expected to showcase the company's technological prowess and outline its long-term growth strategy to the global investor community.
The Nasdaq listing is also projected to close the valuation gap between SK hynix and its U.S. competitor, Micron Technology Inc. Despite leading in the HBM market and outperforming Micron in both global DRAM market share and operating profit, SK hynix has historically traded at a price-to-earnings ratio (PER) 20-40 percent lower than its U.S. counterpart. Analysts suggest that the ADR listing may further bolster the company's global valuation by removing historical barriers to U.S. institutional investment, such as trading hours, currency exposure, and investment procedures.
'Global competitors are trading at PER multiples above 10 times this year's expected earnings, while SK hynix continues to trade at a significantly lower multiple,' stated Park Jun-young, an analyst at Hanwha Investment and Securities. 'The ADR listing could serve as a catalyst for closing that valuation discount.'
SK hynix has priced the ADRs at approximately a 2.9 percent premium to Thursday's closing price of its common shares in Seoul, indicating the company's confidence in global investor backing despite recent fluctuations in its domestic share price. The funds raised are expected to bolster SK hynix's financial position as it increases investment to satisfy the growing demand for AI memory chips and advanced semiconductor manufacturing capabilities.
Previously, SK hynix announced its intention to utilize the proceeds to construct a new semiconductor fabrication plant and an advanced chip packaging facility in South Korea as part of a government-led initiative. The company also plans to invest 11.9 trillion won in extreme ultraviolet (EUV) lithography equipment, scheduled for installation by the end of next year.