South Korean chipmaker SK Hynix has raised an unprecedented $26.5 billion in its New York share offering, selling 177.9 million American depositary shares (ADRs) at $149 each. Each ADR represents one-tenth of a common share traded in Seoul. This makes it the largest ever listing by a foreign company and the second-largest IPO in US history, only behind SpaceX’s $85.7 billion offering. The deal surpasses Alibaba’s $25 billion listing in 2014.
The offering saw immense demand, with orders during the book-building process reportedly over seven times the number of available shares. This strong investor interest highlights the significant appetite for key companies in the artificial intelligence (AI) supply chain, as SK Hynix is a crucial supplier of high-bandwidth memory chips to AI chip giant Nvidia. The company's market value topped $1 trillion in South Korea in May, driven by the AI boom.
SK Hynix priced its listing at a 2.9% premium over its closing price on the Korean stock market, an unusual move as large equity offerings are typically discounted. This premium price suggests strong investor confidence despite recent market fluctuations where chip stocks have lost some momentum. The company expects the funds to finance new factories and equipment to meet the surging demand for AI chips. Trading for the ADRs on Nasdaq began conditionally on Friday under the ticker symbol "SKHYV," with regular trading expected on Monday under "SKHY."
This US listing is expected to help SK Hynix narrow its valuation gap with US rival Micron, which benefits from direct access to the world's largest pool of investors. Despite Micron having less market share in key memory products, it trades at a higher 12-month forward price-to-earnings ratio of 6.66 times compared to SK Hynix's 5.5 times. Analysts like Daniel Newman of Futurum Group note SK Hynix's leadership in share and proximity to Nvidia, while Ken Mahoney of Mahoney Asset Management emphasizes the company's production scale and pricing power due to demand outweighing supply.
The offering is seen as a crucial test of continued investor enthusiasm for memory chip makers amidst the AI boom. While the US listing provides easier access to significant investment, there are risks, such as potential shifts of investment away from South Korea's stock market. However, the South Korean government might be counting on these funds to support SK Hynix’s domestic investments, including recently announced plans for over $880 billion in investments in partnership with SK Hynix and Samsung.
