[Edaily Reporter SOYEON KIM ] SK hynix will issue American Depositary Receipts (ADRs) on the Nasdaq market on the 10th of next month. While concerns have been raised that this could lead to a decline in foreign investment inflows into South Korea, there is also significant speculation that it could attract capital from major global investors of a different caliber.

In particular, as SK hynix has firmly committed to allocating the entire sum—approximately 45 trillion won—toward expanding its artificial intelligence (AI) memory production capacity, expectations are growing that the company will take the lead in the memory market.

According to industry sources on the 26th, retail investors are expressing concerns that SK hynix’s stock price on the domestic market might fall as a result of the diversification of supply and demand following the ADR issuance.

SK hynix announced in a regulatory filing on the 24th that it will issue new shares to the domestic market via a third-party allotment, deposit the new shares with an overseas depositary, and issue U.S. ADRs based on those deposited shares. The new shares issued through this process will be listed on the domestic market but will not be traded. The entire volume of new shares issued for the ADRs will be issued as underlying shares to an overseas depositary. Accordingly, the overseas depositary will be the recipient of the third-party allocation of the new shares.

The total number of shares to be issued is 17.79 million, the maximum allowable limit for new shares, and the price per share has been set at 2,555,000 won, based on the closing price on the 23rd. In accordance with the procedure, new DRs worth 45.4535 trillion won will be issued; the exact amount raised will be determined after the U.S. book-building process and the final offering price is set.

This is a rights offering that will increase the total number of SK hynix shares by up to approximately 2.5%. The ownership stakes of existing shareholders may decrease accordingly.

◇ Potential for Massive Inflow of Funds from Global Institutional Investors

However, the market and experts do not view concerns over share dilution as a serious negative factor. Rather, they interpret it as potentially positive for the stock price, as it opens the door to new capital inflows. Funds from massive U.S.-based passive funds and global pension funds could flow in. A key advantage is the potential for investment from global heavyweights—players in a completely different league—unlike anything seen before.

Furthermore, SK hynix has historically been undervalued in the market compared to Micron. With the listing of its ADRs on the U.S. Nasdaq market, a “rising tide” effect is expected, where the value of SK hynix’s domestic shares will also increase. This represents an opportunity for the company to be fairly valued in the U.S. market, reflecting its elevated status as a memory chip manufacturer.

U.S. ADRs and domestic SK hynix shares can be converted into one another at any time. Ten U.S. ADRs are equivalent in value to one Korean share. Consequently, if ADRs gain popularity in the U.S. market, this could automatically trigger buying interest in SK hynix shares on the domestic KOSPI.

According to the schedule outlined in SK hynix’s registration statement, the statement will take effect on the 6th of next month. Following this, SK hynix will submit a prospectus and begin the full-scale public offering process.

The tentative schedule calls for the company to begin the bookbuilding process for institutional ADR investors on the 6th of next month, and based on the results, to finalize the offering price on the 10th (the 9th, U.S. time) and sign an underwriting agreement with the lead underwriters. This will determine the total amount to be raised. During this period, SK hynix also plans to conduct roadshows targeting global institutional investors in the U.S., Europe, and Asia.

Subsequently, the ADRs are scheduled to be officially listed on the Nasdaq on the 10th of next month (U.S. time), at which point trading will begin, and the proceeds from the public offering are expected to be deposited on the 14th.

The U.S. Securities and Exchange Commission (SEC) is continuing its review of the listing application. The schedule announced this time is tentative and contingent upon the securities registration statement becoming effective. It is subject to change depending on the approval schedules of regulatory authorities in both South Korea and the U.S.

◇ All 45 Trillion Won in Proceeds to Be Used for Future Investments

In particular, how the approximately 45 trillion won raised through the ADR issuance will be used is of critical importance. SK hynix stated that the raised funds will bring the company one step closer to preparing for the future of AI memory. The company announced that 100% of the funds raised will be allocated exclusively to facility investments aimed at maintaining a significant technological lead, such as in High Bandwidth Memory (HBM).

All funds raised by SK hynix through this ADR listing are scheduled to be allocated to capital expenditures. Specifically, the funds will be used for construction costs related to Phase 1 of the Yongin Semiconductor Cluster, as well as for the construction of the Cheongju Package & Test (P&T) 7 advanced packaging fab, along with equipment and ancillary expenses. SK hynix also plans to use the funds to acquire machinery, such as extreme ultraviolet (EUV) lithography equipment. The company’s strategy is to solidify its leadership in future AI memory semiconductors by investing heavily in next-generation semiconductor packaging and new fab construction.

However, there remains a possibility that the issuance of ADRs could lead to increased stock price volatility. As the price discovery function is strengthened, stock price volatility could increase. This is because when market sentiment is favorable on the U.S. Nasdaq, investors generate massive leverage and buy up ADRs explosively; however, if the semiconductor market conditions deteriorate even slightly, they may dump large volumes of shares. Since the speed of capital inflows and outflows is overwhelmingly faster than in the domestic market, stock price volatility is bound to increase.