[Edaily SOYEON KIM Reporter Kim Hyung-wook] The fundraising strategies of Korean companies seeking to grow their U.S. subsidiaries—which are expected to drive future growth—in local capital markets have hit a snag. With SK hynix suspending the initial public offering (IPO) of its sub-subsidiary Solidigm, a debate is intensifying over concerns that dual listings could erode shareholder value and the need for overseas subsidiaries to raise funds independently.

Some observers are questioning whether it is appropriate to uniformly rule out the option for high-growth U.S. subsidiaries to raise investment capital locally. With the possibility of IPOs for companies such as HyundaiMotor Group’s Boston Dynamics and LGELECTRONICS’ Bear Robotics also being discussed, there are growing calls to use this case as an opportunity to establish more refined standards balancing shareholder protection and corporate autonomy in fundraising.

◇ Intensifying U.S. Pressure Highlights Importance of Timely Investment

The industry is clearly on edge following SK hynix’s decision to suspend its review of Solidigm’s pre-IPO (pre-initial public offering) funding and IPO plans.

Solidigm is a U.S. subsidiary launched by SK hynix in 2021 after it acquired Intel’s NAND flash and SSD businesses for $9 billion. With demand for high-capacity enterprise solid-state drives (eSSDs) surging due to the recent expansion of artificial intelligence (AI) data centers, the company’s growth potential is once again coming to the fore. Solidigm, which manufactures NAND at its Dalian plant in China, faces limitations in meeting the growing demand for AI memory with its existing production capacity alone, increasing the need to secure additional production facilities in the United States.

The company determined that leveraging external capital through an IPO would allow SK hynix to allocate its cash reserves to investments in its core business, such as high-bandwidth memory (HBM), while also expanding its capacity for shareholder returns, including dividends, share buybacks, and share cancellations.

SK hynix believed that Solidigm’s growth potential—which is not yet fully reflected in its current enterprise value—could be clearly evaluated through a separate listing. Reuters previously reported that Solidigm had considered a plan to raise approximately $15 billion (about 20 trillion won) while securing an enterprise value of up to $150 billion. Considering the pressure to localize semiconductor production facilities in the U.S. and competition from Micron to expand capacity there, raising funds through the local capital market offers advantages in securing a U.S. production base and making timely investments.

With the suspension of this IPO, SK Group has been forced to explore alternative funding options. While industry observers believe options such as direct investment, attracting strategic investors, joint ventures (JVs), and project-specific funds are possible, the industry and market’s sober assessment is that these alternatives would be less effective than a Nasdaq listing.

◇ “Overseas Listing = Erosion of Shareholder Value”: A One-Size-Fits-All Standard Is Inappropriate

The problem is that similar controversies are likely to recur at other major conglomerates. HyundaiMotor Group is considering a Nasdaq listing for its U.S. robotics subsidiary, Boston Dynamics, and LGELECTRONICS’ U.S. robotics subsidiary, Bear Robotics, is also reportedly pursuing a U.S. IPO. A senior industry official stated, “Financial authorities need to examine the potential for erosion of shareholder value in advance, and we recognize that there is room to view this as a duplicate listing,” but added, “We must also consider whether uniformly blocking the listings of overseas subsidiaries is desirable from the perspective of corporate investment autonomy.” The official argued that this is a matter for companies to judge for themselves and transparently persuade their shareholders, rather than one requiring excessive intervention by the authorities.

In particular, the industry is focusing on whether subsidiaries acquired through overseas mergers and acquisitions (M&A) and developed separately can be judged by the same standard as “split listings.” Solidigm is not a company spun off from SK hynix’s existing core business but a subsidiary created by acquiring Intel’s NAND business. Solidigm’s revenue accounts for less than 10% of SK hynix’s total revenue. The same applies to Boston Dynamics and Bear Robotics.

This case has also made it clear that companies listing in the U.S. will find it difficult to escape their duty to protect the common shareholders of their domestic parent companies. For example, if Boston Dynamics pursues an IPO in the future, it will likely have to explain what benefits will accrue to shareholders of its investing affiliates, such as HyundaiMotor, KIA CORPORATION, and HyundaiMobis. A financial market official stated, “Rather than treating the IPO of overseas subsidiaries as taboo by applying a one-size-fits-all standard, we must consider the purpose of the listing, the ratio of new to existing shares, the parent company’s stake after the listing, and how the increase in the subsidiary’s value benefits existing shareholders.”