Chip Party Must Go On: SK Hynix To Raise $29 Billion In US Listing

About two days after a Chosun media report from South Korea sparked a global sell-off in memory stocks and triggered a 10% crash in the Kospi, a new report states that memory giant SK Hynix is planning a massive $29.4 billion US listing. This move will test investor appetite for another mega AI-linked offering and demonstrate whether markets can absorb another massive listing weeks after the SpaceX IPO.

Bloomberg reports the offering would be the largest U.S. listing by a Korean firm and the biggest ever via American Depositary Receipts, easily exceeding Alibaba’s $25 billion 2014 debut.

The offering is being led by Bank of America, Citigroup, Goldman Sachs, and JPMorgan. SK Hynix is at the center of the AI infrastructure buildout, serving as one of the top suppliers of high-bandwidth memory chips used in AI chip stacks at data centers.

The listing gives SK Hynix access to a much broader and more liquid US investor base, which could help narrow its valuation discount to Micron – similar to how TSMC’s ADR listing attracted global flows and sustained a premium valuation.

UBS analyst Nicolas Gaudois’s first take on the news:

Headline:

ADR listing targeted 10 July, to raise up to Won45tn, 17.8m shares (1 to 10 ADRs; 2.5% of outstanding).

Our Take:

Size/timing in line with investor expectations. We expect SKH to buy back shares to maintain SK Square ownership >20% (currently 20.5%). We believe SKH will continue to buy back and possibly issue some in the US to provide more liquidity over time.

CLSA Analyst Sanjeev Rana said the US listing of SK Hynix will help boost liquidity in the stock and propel a further rally.

“If they can get at least a valuation multiple similar to Micron, for example, then the local shares also need to reflect that, so that kind of expectation is there,” Rana said. “I wouldn’t be surprised if this rally continues.”

Pictet Asset Management analyst Jon Withaar said, “A large part of the motivation behind this is no doubt the success of TSMC ADR which is very liquid, trades at a persistent premium to the Taiwan line and is accessed readily by globally investors.”

“While we might see some sell on the news, the news is overall positive for SK Hynix,” said Kevin Net, head of Asian equities at Financière de l’Echiquier. “The listing will help SK Hynix receive more funding for further investment, and it will also drive higher probability for more shareholders return and reduce valuation discount to Micron.”

Meanwhile on Tuesday:

• Ahead Of The Korea Open: Goldman Warns More Selling On Deck, As Everyone Dumps On Retail
• Korea Crashed: Goldman Explains What Happened And Why It Matters

Surging demand for HBM chips has sent SK Hynix shares in Seoul soaring, with retail investors piling into chip trades. The stock has climbed about 306% this year, pushing the company’s market value above $1.2 trillion.

To keep that momentum alive, SK Hynix now appears to be turning to the US investor pool. Its planned US listing, expected to begin trading on July 10, would certainly provide a more direct way to buy into the HBM boom.