SK Hynix lowered the total issuance amount of its American Depositary Receipts (ADRs) from about 45.4535 trillion won to about 43.1408 trillion won in a corrected filing on the 6th. The listing schedule for the ADRs on the Nasdaq market on the 10th remains unchanged. Subscription and payment are set for the 14th, and the planned listing date for the new DRs is the 29th.
Preparations have been underway for nearly half a year. In March, SK Hynix privately submitted a registration statement related to the listing to the U.S. Securities and Exchange Commission, with Bank of America, Citi, Goldman Sachs, and JPMorgan serving as joint lead managers. The ticker symbol has been set as “SKHY.” It is being described as one of the largest foreign-company listings in the United States in recent years.
◆ From 45 trillion won to 43 trillion won: how the number was reduced
The reason the total amount fell lies in the formula. According to the filing, the total DR issuance amount is calculated by multiplying the maximum new share issuance limit of 17.79 million common shares by the benchmark stock price. In the initial filing, the benchmark was the closing price of 2,555,000 won on the 23rd of last month. In this corrected filing, the closing price of 2,425,000 won on the 3rd of this month, the day before the filing was submitted, was applied. As the stock price fell by about 5 percent in the meantime, the total amount also decreased by a little over 230 billion won.
There is no reason to interpret this figure as a failure to raise funds. The amount stated in the filing is the theoretical maximum based on the issuance cap times the market price, essentially a price tag. The actual amount the company will receive will be determined after bookbuilding with overseas institutional investors sets the final offer price. If the stock price rises again, another amended filing increasing the total amount could also be made.
The background to the stock-price adjustment lies in overall market conditions. With concerns over tightening by the U.S. Federal Reserve, volatility in global technology stocks increased, and the domestic market, which has a heavy semiconductor weighting, also fluctuated. SK Hynix shares, which had surged to around 2.91 million won immediately after the listing announcement last month, later retreated to the 2.4 million won range.
◆ More about valuation than cash: the Nasdaq move
An ADR is a certificate that allows foreign companies’ shares to be bought and sold in the U.S. market in dollars. When SK Hynix issues new shares and deposits them with a depository institution, ADRs based on those shares are traded on Nasdaq. One ADR represents 0.1 of an underlying share.
Because one underlying share is worth in the 2.4 million won range, directly listing it would make it one of the most expensive stocks in the U.S. market, so the structure was designed to lower the investment barrier by splitting it into one-tenth units. The same method is used for companies such as TSMC, ASML, and Toyota in the U.S. market.
The issuance volume equals about 2.5 percent of total shares. The proceeds will be used for facility investment, including construction of the first fab at the Yongin semiconductor cluster, the P&T7 advanced packaging fab in Cheongju, and extreme ultraviolet (EUV) lithography equipment.
However, the market is placing more weight on valuation than on fundraising in this listing. SK Hynix is a company with ample cash thanks to the boom in HBM, or high-bandwidth memory, a key component for AI. The urgent issue is not investment capital but correcting the undervaluation. In the domestic market, SK Hynix’s stock has traded at roughly half the valuation multiple of U.S. competitor Micron relative to earnings. Being listed side by side on Nasdaq would make overseas investors compare the two companies by the same standard.
There is also an effort to gain index inclusion effects. Kim Un-ho, a researcher at IBK Investment & Securities, said in a report last month that “direct Nasdaq listing is likely to increase the chance of inclusion in the Philadelphia Semiconductor Index, and the company could receive a higher valuation than in Korea by being compared directly with Micron.” If funds that track the index are required to buy the ADRs, that demand would help support the stock price. Yoon Jae-hong, a researcher at Mirae Asset Securities, estimated that semiconductor index ETFs and Nasdaq-tracking ETFs could generate demand of $340 million and $450 million, respectively.
◆ Dilution concerns and expectations of revaluation: first test on the 10th
There are also downsides to issuing new shares. As the number of shares increases, the value of existing shareholders’ stakes is diluted accordingly. Some individual investors have raised concerns about this. In its securities filing, SK Hynix explained that the issuance amount is only about 2.5 percent of the total, so the dilution effect is limited.
Market opinion leans toward optimism. Lee Jong-wook, a researcher at Samsung Securities, said that “the ADR itself does not guarantee an increase in corporate value, but it improves investors’ ability to access and trade the stock,” adding that “the outcome of being revalued in the U.S. market could also be reflected in the domestic common stock.” TSMC, which took this path earlier, has seen its U.S. ADR trade at a premium of more than 10 percent over its Taiwan-listed shares.
Attention is also shifting to the next step. Because the stock price in the 2.4 million won range is a burden for retail investors in Korea, some brokerage analysts are mentioning the possibility of a stock split after the listing. The company has not officially announced such a plan. It has only said that it is preparing to announce a shareholder return policy within the year.
What remains now is the market’s judgment. The price that overseas institutions will submit in bookbuilding, and the opening price of trading on Nasdaq on the 10th, will be the first scorecard for this move. Whether the corrected price tag of 43 trillion won was a low starting point will be revealed then.