SK Hynix US listing oversubscribed

SK Hynix US listing oversubscribed

Demand for SK Hynix's $28 billion U.S. Share sale was more than seven times available shares, according to a person familiar with the matter. This underscores huge investor appetite for the South Korean chipmaker, which is a pivotal company in the AI supply chain.

The offering from SK Hynix, which will finance new factories and equipment to meet surging AI chip demand, is set to be the world's second-biggest share sale after SpaceX's record-breaking $85.7 billion IPO last month. SK Hynix declined to comment, and the person declined to be identified as details of the share sale were confidential.

SK Hynix's U.S. Listing is expected to help the company narrow its valuation gap with U.S. Rival Micron. Micron currently trades at a 12-month forward price-to-earnings ratio of 6.66 times, compared to SK Hynix's 5.5 times. According to Yoo Hoi-jun, an electrical engineering professor at the Korea Advanced Institute of Science & Technology, as long as there is demand for graphic processors and AI data centers, SK Hynix is indispensable.

Nvidia CEO Jensen Huang said last month that SK Hynix would continue to be the U.S. AI chipmaker's largest partner, adding that the current memory chip shortage would persist for a few years due to strong demand. SK Hynix has made its fortune by becoming the most sought-after supplier of high-bandwidth memory (HBM) chips, a culmination of 14 years of bets that brought it skepticism and scorn but ultimately put it at the centre of the global AI gold rush.

Though shares in semiconductor companies globally have lost momentum in recent weeks, firms like SK Hynix and rival Samsung Electronics are sitting on historic gains as insatiable demand for computer chips to power AI data centres has sent profits soaring. SK Hynix shares closed up 5% on Thursday, but have dropped by a quarter in the last two weeks. Even so, the stock is up 680% for the past 12 months.

SK Hynix plans to set the final price of the ADR offering on Thursday, and the ADRs will start trading on the Nasdaq on July 10. Ten ADRs will represent one common share, and a Monday filing gave a reference price of 242,500 won per ADR, based on SK Hynix's July 3 closing price in Seoul. On Thursday, the stock closed at 2,186,000 won.

SK Hynix has said that Baillie Gifford Overseas, investment funds managed by Coatue Management, and Situational Awareness Partners have each indicated interest in purchasing up to a combined $7 billion of its U.S. ADRs. The company began marketing the sale on July 6, and about 1,000 institutional investors joined a management marketing call on the same day.

Lee Min-hee, an analyst at BNK Investment & Securities, said that contrary to some market expectations, he did not expect SK Hynix's U.S. Listing to result in a major boost to its local shares. Domestic companies still need to contend with the so-called Korea discount — the tendency for them to trade at lower valuations due to concerns about corporate governance, he noted.

The ADR offering is expected to price in New York on July 9, before the shares reopen for trading in South Korea and ahead of the ADRs' Nasdaq Global Select Market debut on July 10. Limits on converting the South Korea-listed shares into ADRs may restrict arbitrage, which could cause the ADRs to trade at a premium.