[Edaily Reporter Lim Yukyung ] SK hynix(000660)As a special purpose company (SPC) in which SK hynix has invested has become the largest shareholder of Japanese NAND flash memory manufacturer Kioxia, SK hynix has effectively secured the position of Kioxia’s largest shareholder.

According to documents Kioxia submitted to the Tokyo Stock Exchange’s timely disclosure system on the 10th, Toshiba, Kioxia’s previous largest shareholder, reduced its stake from 14.48% (79,028,900 shares) to 14.12% (77,038,200 shares) as of the 3rd.

Bain SPC2, an investment firm established by Bain Capital, maintained a 14.19% stake (77,400,000 shares) and surpassed Toshiba to become Kioxia’s largest shareholder. Since SK hynix holds convertible bonds (CBs) that allow it to secure all of Bain SPC2’s voting rights, SK hynix has effectively secured the position of Kioxia’s largest shareholder.

SK hynix participated in a consortium led by Bain Capital in 2018 to acquire what was then Toshiba Memory (now Kioxia). SK hynix invested 395 billion yen in that special purpose company (SPC) in the form of convertible bonds (CBs). Under the terms of the agreement at the time, SK hynix pledged not to hold more than 15% of Kioxia’s voting rights until 2028, unless Kioxia separately consented.

However, three of the four SPCs through which Bain Capital held its stake in Kioxia—excluding SPC2—exited by selling most of their shares by mid-June, and as Toshiba continued to sell its stake in Kioxia, SK hynix became the largest shareholder without acquiring any additional shares. Toshiba’s position shifted from largest shareholder to second-largest shareholder.

According to Kioxia’s annual report, the company classified this as one of its risk factors, stating that it “could lead to potential conflicts of interest.”

However, this change in the largest shareholder does not mean that SK hynix will influence Kioxia’s management. Currently, SK hynix holds no voting rights; it must convert the convertible bonds (CBs) into shares following approval from competition authorities in various countries before it becomes a shareholder with voting rights.

Kioxia appears to be keeping a close eye on the exercise of voting rights by SK hynix, its competitor in the NAND flash market. In its annual report last June, Kioxia explicitly stated that SK hynix’s holding of convertible bonds (CBs) that could grant it voting rights in Bain SPC2 constitutes a “risk factor with the potential for a conflict of interest.” Kioxia also expressed concern to Japan’s Nikkei newspaper, stating, “The exercise of voting rights by our competitor, SK hynix, may conflict with the interests of ordinary shareholders.”