Market views are split over the planned initial public offering of Solidigm, the U.S. subsidiary of SK hynix (000660). In South Korea, concerns are mounting that another listing within the same group would erode shareholder value. Overseas, analysts argue that raising outside capital would ease SK hynix's investment burden and support earnings over the medium to long term.
Masahiro Wakasugi, senior industry analyst at Bloomberg Intelligence, said in a report on the 15th that the benefits of a Solidigm listing could outweigh concerns about SK hynix's governance structure, according to financial investment industry sources on the 18th. If Solidigm raises its own funds through an IPO, SK hynix would have greater capacity to invest in other high-value businesses such as high-bandwidth memory, or HBM, the report said.
Solidigm is the subsidiary SK hynix established when it acquired Intel's NAND flash business, and it produces enterprise solid-state drives, or eSSDs, used in artificial intelligence data centers. Bloomberg reported that Solidigm has selected Goldman Sachs and Morgan Stanley as lead underwriters and that the offering could raise $10 billion to $15 billion, or about 13.38 trillion to 20.07 trillion won. SK hynix maintains that no decision has been made on whether Solidigm will list.
Bloomberg Intelligence said that with SK hynix continuing to pour money into HBM and server DRAM, outside funding would let Solidigm secure on its own the capital needed to expand eSSD capacity and fund research and development. The firm also viewed it favorably that even if Solidigm issued new shares and gave outside investors a 10% stake, SK hynix would retain the remaining 90% and thus capture most of the annual net profit. Even if the outside stake rose to 20% to 30%, the hit to SK hynix's earnings per share would be limited to 2% to 3%, the report said.
In Korea's capital market, by contrast, critics point to a deepening structure of overlapping listings if Solidigm goes public. Within a chain running from SK Inc. to SK Square (402340) to SK hynix, a separate listing for Solidigm would create what critics call a four-tier overlapping listing structure. The Korea Corporate Governance Forum said that if Solidigm lists on the Nasdaq, it would become an extremely rare case of overlapping listings by global standards. "This is not the time to seek additional overlapping listings," the forum said. "It is rather the time to consider unwinding the three-tier overlapping listing of SK Inc., SK Square and SK hynix."
In a statement on the 1st of this month, SK hynix said covering all investment with its own funds is not necessarily the optimal choice, while adding that nothing has been decided on a listing and that shareholder interests would be taken into account. Should Solidigm pursue an IPO, the balance between new share issuance and sales of existing shares, the post-listing ownership ratio and the intended use of the proceeds are expected to be the key variables in judging the effect on shareholder value.
