Shareholder anxiety is mounting at SK hynix (000660.KS) as speculation spreads that its U.S. subsidiary Solidigm could list on the Nasdaq, while the chipmaker's own shares churn within a range of 1.4 million to 1.7 million won. Investors complain that a Solidigm initial public offering would amount to a duplicate listing that dilutes the value held by SK hynix shareholders. Analysts, too, have offered conflicting assessments of how a Solidigm IPO would affect shareholders.
Solidigm is being discussed as a candidate for a U.S. listing at a corporate valuation of roughly 50 trillion won, with plans to pursue a pre-IPO share investment of up to 10 trillion won, according to the financial investment industry on the 18th. Responding to the rumors, SK hynix disclosed on the 5th that it was "reviewing various options to strengthen Solidigm's competitiveness, but nothing has been finalized so far" — a statement that did not rule out a Solidigm IPO. The following day, on the 6th, SK hynix shares fell 10.37%.
Solidigm is the U.S. entity that SK hynix set up in 2021 when it acquired Intel's NAND and solid-state drive (SSD) business. SK hynix is now pursuing a restructuring that would reorganize the existing Solidigm entity into a U.S. "artificial intelligence (AI) company" and transfer the NAND flash business to a newly established subsidiary, also named Solidigm, placed beneath it.
Even if Solidigm lists on a U.S. exchange, it would not be subject to the duplicate-listing rules recently finalized by South Korea's financial regulators, because Solidigm was brought into SK hynix through a merger and acquisition. Because Solidigm's revenue, operating profit and assets are small relative to SK hynix, the SK hynix board would not even need shareholder approval for a Solidigm IPO.
The problem, separate from the rules, is that the controversy over listing a subsidiary has erupted while SK Group (034730.KS) already maintains a three-tier duplicate-listing structure: SK to SK Square (402340.KS) to SK hynix. With SK hynix having disappointed investors on the 7th with a quarterly dividend of 375 won per common share, shareholders can hardly welcome the latest duplicate-listing controversy.
The Korea Corporate Governance Forum also weighed in with a commentary on the 13th, noting that "among major global semiconductor companies such as Nvidia or Taiwan's TSMC, there is no case of pursuing a duplicate listing of a subsidiary." It said that "strengthening a governance structure through an overseas entity in order to circumvent the three-tier restriction under domestic fair trade law amounts to exporting the 'Korea discount' — the undervaluation of the Korean stock market — abroad."
Analysts Split: 'Bad for Shareholders' vs 'Real Benefits'
Some in the securities industry worry that if a Solidigm IPO materializes, the economic value enjoyed by SK hynix shareholders could shrink. Lee Young-gon, head of the research center at Toss Securities, said in a report on the 13th that "the carve-out listing of Solidigm is an issue that is unfavorable to existing SK hynix shareholders," adding that "if outside investors secure stakes through a pre-IPO and a subsequent public offering, the economic ownership held by SK hynix declines." The point is that while most of the profit and cash flow generated by Solidigm has so far fallen within SK hynix's consolidated scope, after a separate listing that economic value would have to be shared with outside shareholders.
Mirae Asset Securities assessed the possibility of selling a Solidigm stake more positively. Kim Young-gun, an analyst at Mirae Asset Securities, said in a report on the 11th that "the impact on SK hynix's corporate value from releasing a portion of the Solidigm stake is limited," forecasting that "if it raises funds by selling a Solidigm stake, it would secure $15 billion in investment capacity within the United States."
The key question is whether SK hynix can put forward a capital-allocation principle and a shareholder-return policy that offset the Solidigm duplicate-listing issue. SK hynix has recently been actively reviewing additional shareholder-return measures to boost shareholder value, and plans to finalize and announce specifics during the third quarter. Some in the industry expect that SK hynix could unveil a new shareholder-return policy as early as this month.
