[Edaily Marketin JI YEONG-EUI Reporter] As SK Hynix’s U.S.-based semiconductor subsidiary, Solidigm, begins weighing a U.S. stock market listing, controversy has arisen over “dual listings.” Concerns have been raised that the departure of this prime subsidiary will shrink the share of value for parent company shareholders and make a discount in corporate value (double-counting) inevitable. However, there is also a view that, at a time when massive investments in semiconductors are needed, attracting external capital could bring more benefits than drawbacks. The key issue, according to analysts, is whether the actual benefits of funds raised through an IPO can sufficiently offset concerns about the dilution of existing shareholder value.

According to investment banking (IB) industry sources and foreign media reports on the 17th, Solidigm is considering a listing on the U.S. stock market as early as next year. Reuters reported last month that Solidigm’s enterprise value could reach up to $150 billion (approximately 200 trillion won) and that the company could raise about $15 billion through an IPO. SK Hynix maintains that no specific details have been finalized. Recently, the possibility of building a semiconductor factory in the U.S. has also come to the fore. On the 15th, Reuters reported that SK Hynix is linking plans to build a new NAND factory in the U.S. to its discussions with the U.S. government regarding the import of U.S.-made semiconductor equipment for its Dalian plant in China. The Solidigm IPO was also cited as one of the ways to secure funding for the U.S. factory.

Semiconductor factories require massive initial investment. In particular, SK Hynix is in a situation where it must invest heavily in various businesses, including High Bandwidth Memory (HBM), DRAM, and NAND. If Solidigm secures its own investment funds by attracting external capital, it could reduce the amount of funding the parent company would have to bear directly and free up resources to invest in other businesses.

The timing of the IPO is also a key consideration. Demand for Solidigm’s flagship product, enterprise solid-state drives (eSSDs), is growing, driven by expanding investments in artificial intelligence (AI) data centers. However, the NAND flash industry is characterized by significant fluctuations in prices and profitability depending on supply and demand. It is reasonable to assume that securing investment funds by achieving a high enterprise value during a boom could partially alleviate the burden of fundraising should market conditions deteriorate in the future.

The issue is that the need for funding and concerns about the erosion of shareholder value due to a dual listing are separate matters. Even if raising external capital is beneficial for the company, it is difficult to recognize the practical benefits of the listing if the value that existing shareholders must sacrifice in return is greater.

In fact, if Solidigm issues new shares, the company will receive investment funds, but SK Hynix’s ownership stake will decrease. Conversely, if existing shares are sold, the proceeds go to the shareholders selling their shares, but no new funds flow directly into Solidigm. This means that even if the scale of the listing is the same, the effects on the parent company, the subsidiary, and existing shareholders differ depending on the method of fundraising.

Furthermore, there are concerns that a subsidiary’s IPO could lead to a discount on the parent company’s enterprise value. This is because shareholders who invested in SK Hynix based on Solidim’s growth potential will be able to choose to invest directly in Solidim’s stock after the IPO. In the domestic stock market, there has been consistent criticism that the rights and interests of parent company common shareholders were not sufficiently protected during past instances of duplicate listings of subsidiaries.

Some observers point out that companies should also consider whether there are alternative methods of raising capital besides an IPO. The question remains: if a company can utilize its own cash flow or borrow funds, is it really necessary to sell a stake in the subsidiary to outside investors? Conversely, securing large-scale investment funds without increasing the debt burden could prove more advantageous in the long run.

An investment banking industry official stated, “The NAND business is directly exposed to price volatility risks,” adding, “Solidigm’s IPO isn’t necessarily a bad thing for shareholders. However, whether shareholder value is eroded or not will depend on how the funds raised through the IPO are utilized.”

The source continued, “What will determine the pros and cons of Solidym’s IPO are the specific terms, rather than the listing itself. Key factors include how much equity will be sold to raise funds, what investments the raised capital will be used for, and how the returns will benefit existing shareholders.” The source added, “Since the listing structure and plans for using the funds have not yet been finalized, it is necessary to evaluate both the potential to reduce investment burdens and the possibility of diluting shareholder value.”