SK hynix Inc., the South Korean firm that rivals Samsung Electronics Co. Ltd. and Micron Technology Inc. as one of the world’s top memory chipmakers, said today it will sell almost 17.8 million shares when it launches its U.S. initial public offering later this week.
The sale is expected to help the company raise around $28 billion in funding, based on its closing share price in Seoul earlier today.
SK hynix will be selling American depository receipts to U.S. investors. Known as ADRs, they’re a kind of certificate that makes it possible to trade foreign stocks without having to trade directly on an overseas exchange platform. Each ADR will represent the equivalent of a 10th of a common share, the company said. It’s expecting to price the securities on Thursday, before trading begins on Friday morning.
Similar to Micron and Samsung, SK hynix has benefited immensely from the artificial intelligence-fueled demand for memory chips in the last couple of years, with its momentum driving it to numerous all-time highs in terms of both its revenue and its value. First-quarter sales almost tripled from the same period one year earlier, while the stock has gained more than 260% since the start of the year.
SK hynix is in demand because of the memory-intensive nature of AI systems. As hyperscale data center operators and neoclouds race to build out their AI factories and those facilities multiply globally, the demand for memory chips has outstripped available supply. The result has been an acute shortage of the chips, including high-bandwidth memory or HBM, dynamic random-access memory or DRAM, and NAND flash systems.
Memory chips are critical to AI applications because they’re what store and move the data that flows through AI systems. As shortages intensify, many experts have labeled the situation as the “RAMageddon,” blaming it for the rising prices of everyday consumer electronics such as Apple Inc.’s Mac computers and iPad devices.
Until now, U.S. investors that wanted exposure to SK hynix have been forced into using roundabout methods, such as by acquiring shares in the Roundhill Memory exchange-traded fund, which holds a bag of both Korean and American memory chip stocks. Since launching in April, Roundhill Memory has become the fastest ETF in history to top more than $20 billion in assets.
SK hynix’s stock edged lower in trading on Monday in Korea, because the ADRs will dilute the value of existing shareholders, but despite this, most chipmakers made strong gains once the U.S. markets opened for trading.
SK hynix and Samsung have vowed to invest more than $550 million in building out new manufacturing facilities to try to meet the increased demand for memory chips, but some experts believe that doing so is actually a risky move for the companies. By the time those new production facilities are ready to roll, the AI industry’s memory requirements might be very different, meaning they end up producing more chips than buyers actually need. If that happens, it would likely result in a glut of chips hitting the market, crashing prices.
However, there are many who believe that demand is unlikely to taper off anytime soon. Moreover, Wall Street investors are desperately searching for the next Nvidia Corp., and memory chip firms are looking like one of their best bets.
“While market volatility has been quite high recently, I would expect demand for SK hynix shares to remain relatively robust,” Petra Capital Management analyst Albert Yong told Reuters.
Shares of Micron, the only major U.S. memory chipmaker, have shot up more than 700% over the last year and are up 245% in the year to date. It recently saw its market capitalization surge past the $1 trillion mark, thanks to record, AI-driven demand for its memory products.
SK hynix is expected to set the price for its U.S. listing on Thursday, and the ADRs will then start trading on Friday morning, its regulatory filings revealed. Executives of the company are expected to meet with global investors on a roadshow later this week.
If the listing reaches its anticipated target, it would become the second-biggest share sale in history, surpassing Saudi Aramco’s $25.6 billion IPO in 2019. SpaceX Corp., which went public last month, holds the record after raising a stunning $85.7 billion on its first day of trading.
Photo: SK hynix
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