SK hynix Debuts on Nasdaq With Record Foreign IPO, Directs 40 Trillion Won to Yongin, Cheongju

SK hynix (000660.KS) made a spectacular Nasdaq debut, pulling off the largest initial public offering (IPO) by a foreign company in the United States. Notably, it achieved premium pricing — an offer price at a premium — for the first time in U.S. IPO history, proving the competitiveness of Korean memory in the global market. With the 40 trillion won it raised, SK hynix will accelerate the construction of its Yongin and Cheongju fabs and begin in earnest to realize SK Group Chairman Chey Tae-won's vision of restoring a 2,000 trillion won market capitalization and becoming an artificial intelligence (AI) company.

SK hynix announced its Nasdaq debut to the world through an American depositary receipt (ADR) listing ceremony held at the Nasdaq Stock Exchange in New York state on the 10th, local time. Chairman Chey attended the opening bell ceremony in person alongside key executives including SK hynix Chief Executive Officer (CEO) Kwak No-jung, repeatedly raising his right thumb to celebrate the listing. In connection with the listing, he reportedly reiterated the goal of SK hynix reaching a 2,000 trillion won market capitalization.

CEO Kwak pledged that through the Nasdaq listing, SK hynix would strengthen cooperation with U.S. big tech firms and memory supply, while also contributing to local investment and talent development. "The reason SK hynix has come to Nasdaq is first of all to be closer to and build deeper partnerships with the customers leading innovation, at the epicenter of AI," he said. "Also, investing in SK hynix has not been easy for many global investors, but through this listing, they will be able to access SK hynix more easily." He added, "We know that such an opportunity comes with responsibility, and so we will contribute to supporting innovation, strengthening the industry, and building the ecosystem in the United States."

Through the Nasdaq listing, SK hynix will issue 177.9 million ADRs at $149 per share, raising a total of $26.5 billion (about 40.0231 trillion won). This is the largest by a foreign company listed in the United States, surpassing China's Alibaba ($25 billion, about 38 trillion won) in 2014. SK hynix also achieved premium pricing — offering shares at a higher price than the existing stock price — for the only time in U.S. IPO history. The ADR offer price was set 3% higher than the domestic main shares. The industry reaction is that this is unusual, given that companies conducting large-scale IPOs typically issue shares at a lower price than the existing stock price to attract investors.

SK hynix's ADR bookbuilding reportedly drew subscriptions exceeding seven times the offering volume, which is interpreted as reflecting strong interest from foreign investors in the memory super cycle (a period of extreme boom). The industry also says that as the won-dollar exchange rate — which had surged to the mid-1,500 won range last year — has recently stabilized somewhat, the value of SK hynix's domestic main shares rose in U.S. dollar terms, which had a positive effect on the ADR offer price calculation.

SK hynix will secure 40 trillion won through investors' payment of the ADR offering proceeds on the 14th of this month, and will invest all of it in expanding domestic semiconductor production lines. By 2030, these funds will be used to build the first fab at the 31 trillion won Yongin semiconductor cluster (integrated complex), construct the 19 trillion won Cheongju P&T7 advanced packaging fab, and purchase advanced extreme ultraviolet (EUV) equipment to respond to next-generation processes. In the case of the Yongin first fab, the investment execution schedule is more imminent than the Cheongju fab, with 7.4 trillion won this year, followed by 10.1 trillion won next year and 6.6 trillion won in 2028, so the funds raised are likely to be allocated to the Yongin first fab first.

The industry expected three major effects from SK hynix's Nasdaq listing. First, by immediately raising a large amount of funds equivalent to a year's capital expenditure (CAPEX), SK hynix will be able to proactively expand infrastructure. The 40 trillion won far exceeds SK hynix's CAPEX of 30.173 trillion won last year and is on par with this year's CAPEX of 40 trillion to 50 trillion won forecast by securities firms.

Although SK hynix is enjoying the memory super cycle, there is inevitably a time lag before its actual investment capacity expands. In this situation, by raising 40 trillion won all at once on the 14th, it can execute large-scale investment plans early. SK hynix's funds to be invested in major infrastructure hubs total 1,100 trillion won, including 600 trillion won for the Yongin cluster, 100 trillion won for the Cheongju NAND and advanced packaging fabs, 400 trillion won for the two new semiconductor fabs to break ground this year in Gwangju, South Jeolla Province, and about 6 trillion won for the advanced packaging fab in Indiana, United States.

Second, SK hynix can seek to restore a 2,000 trillion won market capitalization through a valuation on par with global big tech. "It could be revalued in comparison with the global peer group and aim for an enterprise value on par with U.S. big tech," an industry official said. "If the company's credibility and reliability rise, it will also be advantageous for winning customer orders and expanding the market in the future." As SK hynix has a vision of transforming into a global AI company, it is important to join the ranks of big tech by enhancing enterprise value.

Accordingly, Chairman Chey has also repeatedly stressed that reaching a 2,000 trillion won market capitalization is more important than anything for SK hynix's mid- to long-term growth. In a special interview earlier this year related to his book "SK hynix's Underdog Story: Super Momentum," he said, "The market still perceives SK hynix as a commodity (a product that is difficult to differentiate) manufacturer and has not recognized a higher value," adding, "SK hynix needs to grow at least 10 times larger than now, and in a few years I will raise the target to 2,000 trillion won." SK hynix's market capitalization surpassed 2,000 trillion won for the first time ever on the 22nd of last month, but has since fallen back to 1,554 trillion won as of this day. It is trailing not only Samsung Electronics (1,666 trillion won) but also Micron (which has lower operating profit; $1.1199 trillion, about 1,693 trillion won).

Finally, the IPO's success proves global investors' high expectations for the memory industry and, in particular, can lead to dispelling the recently raised "memory peak theory." Through this, there are forecasts that benefits such as stock price boosts and investment attraction will spread throughout the K-semiconductor industry as a whole, including not only SK hynix but also Samsung Electronics. Recently, Samsung Electronics surpassed Nvidia to achieve the world's highest quarterly operating profit, and SK hynix is also expected to post comparable results, yet concerns emerged that memory demand and corporate growth rates would slow, causing the securities market (KOSPI), including semiconductor stocks, to fall sharply.

In addition to this fundraising and stock price boost, SK hynix is preparing to greatly expand its investment capacity, foreshadowing unprecedented earnings growth this year. According to FnGuide, the consensus (securities firms' average forecast) for SK hynix's annual operating profit this year is 277.6411 trillion won, about six times last year's 47.2063 trillion won. Next year, 400 trillion won is projected. With the surge in memory prices, the operating profit margin is also expected to rise steeply from 49% last year to 77% this year. Cash and cash equivalents, which represent investment capacity, are forecast to grow sequentially from 15 trillion won last year to surpass 100 trillion won by year-end in line with the company's target this year, and to the 300 trillion won range next year.