SK hynix (000660.KS), which is preparing for a listing of American depositary receipts (ADRs), is considering paying its listing underwriters a fee of about 0.5% of the funds raised, according to reports. While the fee rate itself is lower than Wall Street norms, the total fees could approach 200 billion won given the sheer size of the deal, some projections suggest.
Bloomberg reported Wednesday, citing multiple sources, that SK hynix is in discussions with its ADR listing underwriters over fees and performance-based compensation. The listing underwriters are four major global investment banks — Bank of America, Citigroup, Goldman Sachs, and JPMorgan — and detailed terms have not yet been finalized.
According to Bloomberg, based on SK hynix's recent market capitalization, the funds that could be raised through this offering are estimated at around $26.5 billion (about 40.545 trillion won). Applying a 0.5% fee rate, the total fees received by the underwriters would amount to roughly $130 million (about 198.9 billion won).
The 0.5% fee rate is not high by Wall Street standards. The recent SpaceX IPO, considered the largest on record, carried a fee rate of 0.67%. However, since the SK hynix ADR listing is a "mega deal" with an exceptionally large fundraising scale, it is expected to be one of the transactions this year that generates the most fees for underwriters among Asian corporate deals. Bloomberg assessed that the ADR listing could become a historic stock offering rivaling the $29.4 billion IPO of Saudi Arabia's Aramco in 2019, following the large IPO in which Elon Musk's space company SpaceX raised about $86 billion.
SK hynix is already listed on the Korean stock market and is considered one of the most closely watched global technology stocks this year. As a result, some analysts say the marketing burden on the underwriters will be relatively light, given the high recognition among overseas investors.
Meanwhile, SK hynix has said it plans to issue ADRs backed by common shares equivalent to up to 2.5% of its total issued shares. However, the actual issuance volume and offering size will be finalized after a demand forecast targeting overseas institutional investors. An ADR is a security issued to allow foreign companies to trade their shares on U.S. stock markets.
