TLDR
- SK Hynix stock rose 5.3% in South Korea on Thursday ahead of its Nasdaq ADR listing under ticker SKHY
- The U.S. listing was seven times oversubscribed, with 177.9 million new ADRs being offered
- If priced in line with Thursday’s close, the deal could raise $25.71 billion — the largest-ever ADR offering
- Ten ADRs represent one local South Korean share, implying a price of around $144.50 per ADR
- Major investors including Situational Awareness hedge fund have indicated they’ll buy up to $7 billion worth
SK Hynix stock jumped 5.3% in Seoul on Thursday, closing at 2.186 million won (roughly $1,445), as investors positioned themselves ahead of the company’s highly anticipated Nasdaq ADR listing.
The listing, set for Friday under the ticker SKHY, has already generated enormous demand. The deal closed Wednesday and was reportedly seven times oversubscribed, according to Bloomberg.
Underwriters Goldman Sachs, Citi, Bank of America, and JPMorgan are offering 177.9 million new ADRs. Pricing is expected to be announced Thursday, with allocations to follow.
Ten ADRs represent one local South Korean share, putting the implied ADR price at around $144.50. Some fund managers expected a slight discount to draw buyers in — but at least one London-based hedge fund manager suggested no discount may be offered, given the strength of institutional demand.
At the implied price, SK Hynix would raise approximately $25.71 billion, which would make it the largest-ever ADR offering — narrowly beating Alibaba’s $25 billion U.S. debut in 2014.
It would also rank as the second-largest equity offering of all time, trailing only SpaceX. That’s notable context given it would also surpass Saudi Aramco’s 2019 IPO, which raised $25.6 billion.
The figure is still well below the $29 billion SK Hynix originally targeted before the Korean market entered technical bear territory in recent weeks.
Strong Demand Despite Market Volatility
Despite recent volatility on the Korean exchange and a stiff pullback in the stock, investor appetite has remained strong. Situational Awareness, a hedge fund run by a former OpenAI researcher, has indicated it plans to buy up to $7 billion worth of the ADRs.
Emerging market traders in London noted that some of the recent weakness in the Kospi index may have been portfolio managers raising cash to subscribe to the deal. The modest recovery in the Korean won in recent days is also being attributed to SK Hynix hedging the incoming dollar flows it expects to repatriate.
Valuation Still Looks Stretched — Or Does It?
Despite a 235% return in South Korea so far this year, and a 600% gain over the past 12 months, SK Hynix doesn’t look expensive on the numbers.
According to FactSet consensus, the stock trades at just 5.5 times forward earnings. Analysts have been consistently revising earnings estimates higher as demand for its DRAM and NAND chips continues to outpace supply.
The Nasdaq listing gives U.S. investors a new way to play the memory chip boom directly. Micron Technology (MU) has been the main proxy trade for American investors — and it was already up 3.4% in premarket trading on Thursday.
SK Hynix is the second-largest stock in South Korea and its order book, like that of Samsung Electronics, cannot keep up with demand. That supply-demand imbalance has been driving regular increases in the average selling price of its chips.
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