[Edaily Reporter Shin Ha-yeon ] SK hynix(000660)Opinions in the securities industry are divided regarding the potential pre-IPO and Nasdaq listing of Solidigm, SK hynix’s U.S.-based NAND flash subsidiary. While some analysts suggest that the impact on the company’s valuation will be limited in terms of recouping investment and securing funds for follow-on investments, others express concerns that the economic rights of existing SK hynix shareholders could be diluted during the separate listing process.

According to the financial investment industry on the 14th, SK hynix is pushing ahead with a restructuring plan to convert the existing Solidigm entity into a U.S.-based “AI company” early this year and transfer its NAND and SSD businesses to a new Solidigm entity. Solidigm is a U.S. subsidiary established by SK hynix when it acquired Intel’s NAND and solid-state drive (SSD) businesses. Recently, market speculation has suggested that Solidigm might pursue a pre-IPO funding round of 5 trillion to 10 trillion won, based on an enterprise value of approximately 50 trillion won, before listing separately on a U.S. stock exchange.

A semiconductor industry official stated, “Solidigm is a company created through the acquisition of Intel’s NAND business unit (rather than being a spin-off of an existing business unit within SK hynix for a separate listing),” adding, “It is different in nature from the LG Energy Solution case.”

In the securities industry, the prevailing view is that Solidigm’s IPO should be viewed primarily as a means of recouping investment and securing additional investment funds.

Kim Young-geon, an analyst at MIRAE ASSET SECURITIES, stated in a report, “While some view this as a case of dual listing, we believe it is more appropriate to approach this issue as a means of recovering investment from mergers and acquisitions (M&A) and securing funds for follow-on investments.”

According to MIRAE ASSET SECURITIES, SK hynix committed to investing up to $10 billion in SK hynix NAND Product Solutions, Solidigm’s parent company, last January, while other SK Group affiliates also invested a total of $1.1 billion. Analyst Kim assessed, “If investment funds are raised through the sale of Solidigm shares, SK hynix could secure approximately $15 billion in investment capacity within the U.S.,” adding, “The impact of selling a portion of the stake on SK hynix’s enterprise value would be limited.”

On the other hand, some analysts argue that, given SK hynix’s cash generation capacity, the Solidigm IPO cannot be explained solely by the need to secure investment funds.

Lee Young-gon, an analyst at Toss Securities, pointed out, “Looking solely at SK hynix’s overall financial position, the company is not facing a shortage of funds.” According to Toss Securities, SK hynix’s cash and cash equivalents stood at approximately 88 trillion won at the end of the second quarter of this year, an increase of 33.6 trillion won from the previous quarter, while total debt decreased by 700 billion won. Analysts note that even if the annual investment scale reaches the high 40 trillion won range, it can be covered by a single quarter’s operating profit.

The analyst assessed, “It is difficult to view the purpose of Solidigm’s IPO solely as a means for SK hynix to secure investment funds.” While it is true that Solidigm itself requires large-scale investment for NAND capacity expansion and next-generation product development, the analyst explained that the impact on existing shareholders during the separate IPO process must also be considered.

The key issue is SK hynix’s economic ownership stake in Solidigm. If Solidigm goes public as a separate entity, external investors will acquire shares during the pre-IPO and subsequent public offering processes, which could reduce SK hynix’s economic ownership stake. It has been pointed out that while most of the profits and cash flows generated by Solidigm were previously consolidated into SK hynix’s financials, after the separate listing, SK hynix will have to share the economic value with external shareholders.

The changing structure of cash flow attribution is another variable. This is because cash generated by Solidigm will first remain with the separate entity and must pass through dividends or other capital transactions before moving to the parent company. The analyst explained, “When it goes down to a subsidiary, an additional step is added before the ultimate shareholder can directly enjoy the economic value of the business.”

There is a view that whether Solidym’s IPO will be a negative factor for SK hynix’s stock price will depend not so much on the listing itself, but rather on the scale of the stake sale, the use of the raised funds, and the measures taken to compensate existing shareholders.

The analyst noted, “If SK hynix secures new growth opportunities by attracting external capital through Solidym, that in itself may not necessarily lead to a dilution of shareholder value,” but emphasized, “Since the economic stakes of existing shareholders will be diluted in the process, the company must also present capital allocation principles and shareholder return policies that can offset this dilution.”