July 6 (Reuters) – South Korean chipmaker SK Hynix will launch a U.S. listing on Monday to raise about $28 billion, according to regulatory filings, as it capitalises on the global artificial intelligence boom with one of the world’s largest new share sales.
The company will sell 17.79 million new shares in the depository receipt listing on the Nasdaq. Ten ADRs will represent one common share and the stock will be sold in a price range that is due to be revealed on Monday, based on SK Hynix’s Seoul trading price.
SK Hynix’s share price was down 4% at 2,327,000 won each on Monday, but the stock is up about 273% this year, as it rides surging global investor demand for AI stocks. Korea’s KOSPI was down 2.2% on Monday.
Memory chip stocks were volatile in recent sessions due in part to renewed investor concerns about how long the boom would last.
“While market volatility has been quite high recently, I would expect demand for SK Hynix shares to remain relatively robust,” said Albert Yong, a managing partner at Petra Capital Management.
South Korea last week unveiled a sweeping industrial strategy centred on semiconductors and AI, including a $576 billion chip investment program in the country’s southwest to help spread returns from the boom.
SK Hynix and Samsung Electronics will anchor the investment program, the government said.
South Korean President Lee Jae Myung on Monday ordered officials to move quickly to get to work on major chip and AI projects announced last week.
He warned that delays in permits, land acquisition, and securing power and water supply could undermine the country’s bid to dominate advanced industries.
MEMORY INFLATION
SK Hynix has been among the world’s largest beneficiaries of the AI boom as it outperformed its major rivals Samsung and Micron.
“This is more than a liquidity event,” said Dave Mazza, the chief executive officer of Roundhill Investments in New York, which manages an exchange-traded fund tracking DRAM manufacturers, which is one of the most popular ways for U.S. investors to trade SK Hynix’s stock. “SK Hynix has been one of the most important companies in the world that most U.S. institutions could not easily own.”
“The listing removes an accessibility discount, not a quality discount.”
Steve Sosnick, chief strategist at Connecticut-based Interactive Brokers, said individuals and smaller institutions would benefit from the U.S. listing, rather than large investors.
“The new listing will make it easier for capital-hungry Hynix to directly access a new group of momentum-hungry investors,” Sosnick said.
SK Hynix said the proceeds from the listing of the American Depositary Receipts will be used to build chip factories in South Korea and buy chipmaking equipment including an extreme ultraviolet scanner made by Dutch equipment maker ASML.
The final price of the New York listing is due to be set on Thursday, ahead of the stock starting trade on Friday, regulatory filings showed. The company’s management will meet global investors on a roadshow this week.
The deal is expected to be the second-biggest share sale after a record $85.7 billion initial public offering by SpaceX last month, surpassing Saudi Aramco’s $25.6 billion IPO in 2019 and Alibaba’s similar-sized offering in 2014.
Some investors were cautious that memory “inflation” would dent spending on AI infrastructure, mobile phones and PCs.
“We expect better access, but timing of the memory cycle is equally important,” said Sundeep Gantori, Standard Chartered’s chief investment officer of equities. “We believe memory cycle is beyond the early phase and now in the mid-cycle stage.”
SK Hynix is a key supplier of high-bandwidth memory chips used in AI systems by customers such as Nvidia and Google.
SK Hynix is expected to join the chip-heavy Philadelphia SE Semiconductor index, analysts said, helping pave the way for a surge in passive investments. A Nasdaq listing should help reduce the valuation gap with smaller U.S. rival Micron, they said.
Last month, HSBC said it would raise its valuation of SK Hynix by applying a 20% premium to its previous price-to-book multiple of 2.8 times, implying a multiple of 3.4 times, “reflecting more proactive shareholder-friendly initiatives and improved accessibility to global investors.”
(Reporting by Scott Murdoch, Hyunjoo Jin, Gregor Stuart Hunter and Yantoultra Ngui; Editing by Stephen Coates and Thomas Derpinghaus)
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