SK hynix (000660.KS) could free up capacity to invest in high-bandwidth memory, or HBM, if its U.S. sub-subsidiary Solidigm raises outside capital through an initial public offering, according to a new analysis. If Solidigm funds its enterprise solid-state drive business for artificial intelligence data centers on its own, SK hynix would be able to concentrate its investment capacity on core businesses such as HBM.
Masahiro Wakasugi, senior industry analyst at Bloomberg Intelligence, the research arm of Bloomberg, said in a report released on Oct. 15 that a Solidigm listing could work in favor of SK hynix's medium- to long-term earnings, according to the financial investment industry on the 19th.
Solidigm is a U.S. sub-subsidiary that SK hynix established five years ago after acquiring Intel's NAND flash business. It mainly produces enterprise SSDs used in AI data centers. Rising investment in AI data centers has recently lifted demand for high-capacity storage devices, increasing the need for research and development spending and expanded NAND production capacity.
Bloomberg Intelligence said Solidigm would be able to secure capital spending funds on its own if it attracts outside capital through an IPO. That would reduce the funding burden on SK hynix and expand its capacity to invest in other memory businesses, including HBM and server DRAM, the report added.
The research firm also expects the impact of any change in ownership from the listing to be limited. Assuming Solidigm accounts for 10% of SK hynix's total net profit, Bloomberg Intelligence estimated that allocating a 10% stake to outside investors through a new share issue would cut SK hynix's earnings per share by only about 1%. Even if outside investors' stake rose to 20% to 30%, the decline in EPS would be in the range of 2% to 3%, according to the analysis.
Bloomberg News reported on the 8th that Solidigm had selected Goldman Sachs and Morgan Stanley as lead underwriters for the IPO and was seeking pre-listing investment. JPMorgan Chase, Citigroup and UBS have also joined the underwriting group, and the offering could reach as much as $15 billion, or about 20 trillion won, the report said.
SK hynix says it has not decided whether to list Solidigm. In a statement on Oct. 1, the company said covering all investments with its own funds is not necessarily the optimal choice, and that it would make a decision taking shareholder interests into account.