SK hynix (000660) shares rebounded more than 4% in a single session after the company dropped plans to list Solidigm, its U.S.-based sub-subsidiary. With dual-listing concerns eased, attention now turns to whether the company's earnings release on the 28th will provide grounds for further gains.
Solidigm Listing Halted
Shareholders Cheer, but Questions Remain
SK hynix closed at 1.277 million won on the 23rd, up 4.42% from the previous session, according to the Korea Exchange on the 25th. The stock had fallen more than 5% early in the day before erasing all of its losses and turning higher. That contrasted with Samsung Electronics (005930), which ended up a modest 0.47%. Financial investment industry officials attributed the move to SK hynix's announcement the same day that it would halt its review of a pre-IPO funding round and an initial public offering for Solidigm, removing uncertainty over a dual listing.
Solidigm was created when SK hynix acquired Intel's NAND flash and solid-state drive business in 2021. It is a sub-subsidiary controlled by SK hynix through AI Company, a U.S. intermediate holding company, and sells enterprise SSDs used in AI data centers. For SK hynix shareholders, it is a business that stands to benefit from expanding AI investment alongside high-bandwidth memory.
What shareholders had worried about was the effect of listing that growth business separately. If investors could put money directly into Solidigm, the value of the business might not be fully reflected in SK hynix's share price. The possibility of stake dilution during a listing was another concern.
Still, the funding needed to expand Solidigm's production capacity remains a variable. The company said its assessment of the growth potential and the need for investment has not changed. How it secures the investment funds from here is the remaining task.
Stock at 1.27 Million Won, Target Prices Above 3 Million
Brokerages have kept high target prices even as SK hynix shares went through a steep correction. In a global memory report published on the 19th, Nomura kept its target price at 4.7 million won, saying bottlenecks in the memory supply chain will persist at least through 2028. Behind that view is a forecast that memory supply will fail to keep pace with demand despite market anxiety over AI investment.
Domestic brokerages are also leaning toward profit growth. Hana Securities kept its target price at 3.6 million won on the 13th while raising its operating profit forecast for next year to 405 trillion won from 403 trillion won. It judged that rising DRAM prices would offset the burden from a stronger won. Meritz Securities raised its target price to 3.2 million won from 3.1 million won on the 12th.
All of those targets were set before the Solidigm listing was withdrawn. That means the starting point for the high targets was the profit outlook for the memory business. On top of that, the withdrawal has reduced concerns about a discount to shareholder value. Ultimately, for the rebound to continue, the earnings release will also have to back up brokerages' expectations for selling prices and demand.
Attention Shifts to the Third-Quarter Earnings Call on the 28th
The third-quarter earnings call scheduled for the 28th is expected to show the actual scale of profit along with the outlook for memory prices. Hana Securities and Meritz Securities put third-quarter operating profit at 77.9 trillion won and 80.1 trillion won, respectively, in estimates issued this month. Whether the results match those forecasts, and whether higher selling prices and expanded shipments continue next year, are the main points of interest.
Expectations for shareholder returns are also high. SK hynix carried out a 40 trillion won share buyback from Aug. 20 through the 21st of this month. With that program complete, attention is focused on the size and timing of any additional returns. How the company secures investment funds for Solidigm matters in that process as well, because a heavier direct funding burden on SK hynix could affect the cash available for shareholder returns.
Yang Hyun-kyung, an analyst at iM Securities, said wariness about a dual-listing discount and stake dilution could ease, but added that opportunities to raise outside capital have narrowed and the burden of future investment funds could grow.
Brokerages expect profit growth to support larger shareholder returns. Kim Sun-woo, an analyst at Meritz Securities, said in a report published shortly after the Solidigm listing was withdrawn that there is a high chance the earnings call will present an enhanced shareholder return plan that exceeds previous expectations. If a valuation close to historic lows combines with stronger shareholder return measures, the analyst said, it would drive a meaningful rebound in the share price.
