South Korean memory chip manufacturer SK Hynix officially launched its stock issuance plan in the United States on Monday. It plans to raise approximately 43 trillion won (approximately US$28.07 billion) through the issuance of American Depository Receipts (ADRs) on Nasdaq, becoming one of the largest new share issuances in the world to date. It is intended to take advantage of the global artificial intelligence wave to expand its capital base and international investor coverage.
The company disclosed that Bailey Gifford Overseas Fund, investment funds managed by Coatue Management and Situational Awareness Partners have respectively expressed their intention to subscribe for SK Hynix ADRs with a total subscription amount of up to US$7 billion.
According to regulatory documents, SK Hynix will issue 17.79 million new shares through ADRs. Each 10 ADRs correspond to one common share of the company. The reference price is 242,500 won per ADR. The price is calculated based on the company’s closing price on the Seoul stock market on July 3. The final offering price is expected to be determined on Thursday, shares are scheduled to begin trading on Nasdaq on Friday, and company management will embark on a global roadshow this week to promote the offering. Affected by the news of the issuance, SK Hynix closed down 3.4% on Monday to 2.343 million won. However, the cumulative increase in share price this year is still close to 260%, far exceeding the 0.5% decline of the Korea Composite Stock Price Index that day.
The issuance comes at a time when Asian semiconductor companies are frequently seeking overseas financing, taking advantage of the strong AI theme. Taiwan PCB upstream manufacturer Xinxing Electronics also plans to raise approximately US$1.4 billion through the issuance of overseas global depositary receipts to further capitalize on investors' rising interest in AI-related industries. In the memory chip sector, recent stock price fluctuations have intensified, partly due to concerns about the market's reassessment of whether and how long the "boom cycle" in AI-related demand can last.
Zhou Di, a portfolio manager at Thornburg Investment Management, an asset management company in New Mexico, said that the global storage industry is currently in a "super cycle", and the three major manufacturers Samsung Electronics, SK Hynix and Micron are all enjoying a wave of demand driven by AI. She believes that SK Hynix’s issuance of ADRs in the United States will help expand the company’s investor base and will also have positive significance in narrowing the valuation gap with its U.S. competitor Micron. Yang Hyun-yong, managing partner of Petra Capital Management in South Korea, said that despite recent market volatility, he still expects investor demand for SK Hynix shares to remain relatively strong.
The South Korean government recently announced a comprehensive industrial strategy centered on semiconductors and artificial intelligence, which includes spending approximately US$576 billion to build a large-scale chip investment plan in the southwest to promote the country's global competitiveness in high-end manufacturing and advanced technology, and to share the benefits of technological prosperity more broadly economically. SK Hynix and Samsung Electronics will serve as core companies in this investment plan and undertake key projects. South Korean President Lee Jae-myung on Monday asked relevant departments to quickly advance previously announced major chip and AI projects, emphasizing that delays in approvals, land acquisition, and power and water security may weaken South Korea's leading edge in advanced industry competition.
SK Hynix is seen as one of the biggest beneficiaries of the global AI boom, and its stock price has significantly outperformed major rivals such as Samsung Electronics and Micron. Dave Mazza, CEO of Roundhill Investments, a US asset management company, pointed out that this issuance is not only a simple "liquidity event", but more importantly, it solves the long-standing problem of "availability discount" of SK Hynix shares by US institutional investors. He manages an exchange-traded open-end index fund that tracks the DRAM Makers Index, which is seen as one of the main channels for U.S. investors to participate in SK Hynix shares, and he believes the new listing will eliminate an "accessibility discount," rather than a "quality discount."
Steve Sosnick, chief strategist at Interactive Brokers, believes that the U.S. listing will be more convenient for individual investors and small and medium-sized institutions, rather than large institutional investors who have participated in the international market through various channels. He said the new listing would give "capital-hungry" SK Hynix more direct access to a new group of investors "chasing momentum." The company stated in the announcement that the proceeds from the ADR financing will be used to build a new chip factory in South Korea and purchase advanced process equipment including extreme ultraviolet (EUV) lithography machines produced by Dutch equipment manufacturer ASML to further consolidate its technological advantages in the field of high-bandwidth memory chips.
The offering is expected to be the world's second-largest stock offering after U.S. space exploration technology company SpaceX's record $85.7 billion initial public offering last month, surpassing Saudi Aramco's $25.6 billion IPO in 2019 and Alibaba's similarly sized New York listing in 2014. However, some investors worry that the phenomenon of so-called "storage inflation" - a sharp increase in the price of storage - may inhibit corporate investment spending in AI infrastructure, smartphones and personal computers. Gantari, chief investment officer of equities at Standard Chartered Bank, said that although the U.S. listing will improve the accessibility of SK Hynix shares, the rhythm of the storage industry cycle is equally critical. He judged that the current storage cycle has passed the early stage and is in the middle stage.
As a key supplier of high-bandwidth memory chips (HBM), SK Hynix's products are widely used in AI systems deployed by customers such as NVIDIA and Alphabet's Google, which are of great significance to the upgrade of global computing infrastructure. Analysts predict that as the listing in the United States progresses, SK Hynix is expected to be included in the Philadelphia Semiconductor Index, which mainly focuses on semiconductor stocks, which will bring further incremental investment through index funds and other passive funds. HSBC previously stated that it would give SK Hynix a higher premium in the valuation model and increase its price-to-book ratio valuation by 20% from the original 2.8 times to 3.4 times to reflect the company's more proactive measures in shareholder return policies and its increased openness to global investors.
The global coordinating institutions for this issuance include BofA Securities, Citigroup, Goldman Sachs, JPMorgan Chase and other international investment banks. Regulatory documents show that the proceeds from the issuance will mainly focus on capacity expansion, technology upgrading and global investor relations. Driven by the global AI wave, the South Korean government and leading local companies are trying to further consolidate the country's strategic position in memory chips and artificial intelligence infrastructure through unprecedented capital investment and overseas listing arrangements.