SEOUL, October 23 (AJP) - SK hynix has dropped plans to list its U.S. NAND flash subsidiary Solidigm amid pressure from South Korean regulators and minority shareholders over the potential erosion of shareholder value.
“Solidigm, our overseas subsidiary, has reviewed various financing options to expand production capacity and strengthen its competitiveness. However, after comprehensively considering capital market conditions and other factors, it has decided to discontinue its review of pre-IPO fundraising and an initial public offering,” the company said in a regulatory filing Friday.
The disclosure followed earlier filings responding to an August media report that Solidigm was considering a pre-IPO fundraising round of about 5 trillion won.
The retreat came just a day after Financial Services Commission Chairman Lee Eog-weon confirmed that a separate U.S. listing of Solidigm would fall under South Korea’s rules governing the listing of subsidiaries of publicly traded companies.
Asked at a parliamentary audit whether he agreed with the Financial Supervisory Service governor’s assessment that the proposed IPO constituted a parent-subsidiary listing, Lee replied: “Yes. It is subject to the guidelines.” “SK Square and SK hynix must fulfill the five obligations imposed on parent companies based on their duty of loyalty to shareholders,” he added.
The requirements include assessing the impact on shareholders, devising protections, consulting investors, obtaining a board decision and disclosing the process. The obligations also apply when a subsidiary seeks to list overseas.
Shareholder opposition had intensified as investors questioned whether a standalone listing would dilute SK hynix’s interest in the business and deepen the discount applied to its remaining stake.
SK hynix had about 3.46 million small shareholders holding 67.98 percent of its outstanding shares at the end of June, according to its half-year report. Shareholder group ACT called for a review of the proposed listing and the protections available to existing investors.
The withdrawal also comes after a sharp reversal in the chipmaker’s shares on both sides of the Pacific.
Its Seoul-listed stock closed Thursday at 1,223,000 won, down about 34.3 percent from 1,862,000 won on Sept. 25.
Its Nasdaq-listed American depositary receipts, trading under the ticker SKHY, fell 8.07 percent Thursday to $131.69. That left them $17.31, or 11.6 percent, below their $149 offering price in July, when SK hynix raised about $26.5 billion in its U.S. share sale.
Solidigm’s proposed listing had promised a substantial new source of capital.
Solidigm emerged from SK hynix’s roughly $9 billion acquisition of Intel’s NAND flash and solid-state drive business, announced in 2020. The U.S. company began operating under the Solidigm name in 2021 and supplies high-capacity storage drives for servers, cloud computing and AI data centers.
After years of losses, its return to profitability made the question of who would benefit from its growth more contentious.
The ownership chain runs from SK Inc. through SK Square and SK hynix to AI Company, which holds Solidigm. SK Inc., SK Innovation and SK Telecom have also committed capital to AI Company, creating additional ownership interests alongside SK hynix’s.
The Korea Corporate Governance Forum argued that this structure could allow part of the increase in Solidigm’s value to accrue to other group companies in which Chairman Chey Tae-won has a larger economic interest. It called for the listing to be halted, citing the potential disadvantage to SK hynix shareholders.
SK hynix said Friday that Solidigm’s growth prospects and investment needs had not changed. Rather, recent capital-market conditions and share-price movements warranted reconsidering whether an IPO was the best option for the company and its existing shareholders.
It said it would continue examining the timing, scale and financing of investments needed to expand Solidigm’s capacity and competitiveness.
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