[Edaily Reporter Kim Kyung-eun ] The Korea Corporate Governance Forum has urged SK hynix(000660)to halt its plans to list Solidigm, its U.S.-based NAND flash subsidiary. The forum argues that since Solidigm’s listing could create a conflict of interest between SK Group Chairman Chey Tae-won and minority shareholders, the board of directors must take direct action to resolve the listing and devise a plan to address the undervaluation of the stock.

In a commentary released on the 20th, the Governance Forum stated, “The essence of Solidigm’s dual listing is a conflict of interest,” adding, “Ko Seung-beom, Chairman of the SK hynix Board of Directors, must immediately convene a board meeting to deliberate on the listing proposal and communicate with shareholders.”

The Forum pointed out that Solidym’s listing creates a structure that is disadvantageous to SK hynix’s common shareholders. Currently, SK hynix holds a 100% stake in Solidym through AI Company, a U.S.-based intermediate holding company. The Forum explained that even if Solidym goes public and sells a portion of its shares to external investors, Chairman Choi could maintain management control through the existing corporate structure, but the returns SK hynix shareholders receive from Solidym could decrease.

The forum pointed out, “This is a structure in which Chairman Choi, the controlling shareholder, maintains full control over AI Company and Solidym while shifting the dilution costs solely onto SK hynix’s common shareholders,” adding, “It is an asymmetric structure where 100% control is maintained while Solidym’s profits are shared.”

The forum also raised the possibility of a transfer of wealth among SK Group affiliates during Solidym’s IPO process. SKTelecom, SK Innovation, and SK Inc. have committed to investing a total of $1.11 billion in AI Company by 2030—$480 million, $380 million, and $250 million, respectively. The argument is that if these affiliates secured stakes in AI Company at low prices before expectations surrounding Solidym’s IPO were reflected in its enterprise value, it could spark controversy over unfair practices.

The Forum explained, “This is a scenario in which part of the increased corporate value of AI Company resulting from Solidym’s IPO would shift to companies in which Chairman Choi holds a large stake, rather than to SK hynix.”

The Forum also questioned the necessity of raising funds through Solidim’s IPO. It argued that since SK hynix is expected to generate massive amounts of cash, there is no compelling reason to sell its subsidiary’s shares to outside investors. Based on the Forum’s average of estimates from domestic securities firms, SK hynix’s free cash flow (FCF) is projected to reach 167 trillion won this year and 326 trillion won next year. Cash reserves are also estimated to increase from 132 trillion won at the end of this year to 456 trillion won by the end of next year.

The forum emphasized, “Even if Solidigm needs tens of trillions of won for capital expenditures, SK hynix can simply invest directly through its AI Company,” adding, “It is economically advantageous for shareholders to raise the price-to-earnings ratio (PER)—which is currently at three times its current level—while retaining 100% ownership of Solidigm.”

It also refuted claims from some quarters that Solidim’s IPO should be viewed solely in terms of recouping acquisition costs and reinvestment. Citing YouTube—acquired by Google—and Instagram—acquired by Meta—as examples, the forum explained that a strategy of selling stakes in core subsidiaries to generate short-term cash is not advisable.

The forum stated, “Selling a portion of Solidym’s shares to raise cash is an extremely short-sighted approach,” adding, “It is economically beneficial for SK hynix shareholders for the board of directors and management to increase the valuation multiple—currently at 3x—while retaining 100% ownership of Solidym.”

The forum called on Ko Seung-beom, Chairman of the SK hynix Board of Directors, to seek an official board-level decision regarding the push for a public listing. On June 24, the SK hynix Board of Directors received a report on the establishment of AI Company, which holds a 100% stake in Solidigm, and the progress of the initiative.

The Forum stated, “Chairman Ko must immediately convene a board meeting to deliberate on the Solidym IPO proposal from various perspectives and disclose the details to communicate with shareholders.” It added, “Even if there is no harm to the company itself or if it aligns with business needs, there is a possibility of violating the amended Commercial Act if the interests of some shareholders are infringed upon or if the economic or controlling positions among shareholders change,” and noted, “The mere fact that Solidim needs to raise funds may not be sufficient to justify the IPO.”