Recently, the term 'Solidigm' has been making waves in the stock market. Solidigm, a U.S. subsidiary launched by SK Hynix in 2021 after acquiring Intel's NAND business, aims to enhance its competitiveness in NAND and eSSD technology. This company, located on the other side of the globe, is influencing SK Hynix's stock price significantly.
On October 21, the Korea Exchange reported that SK Hynix's stock price rose by 71,000 won (5.81%) to 1,294,000 won. Despite this increase, the recent trend has not been favorable, with the stock down 131,000 won (9.19%) compared to a week ago. In contrast, the KOSPI index rose by 273.15 points (4.76%) during the same period.
Investors are particularly focused on the potential IPO of Solidigm. Bloomberg recently reported that Solidigm has selected Goldman Sachs and Morgan Stanley as lead underwriters for its IPO, with speculation that it could list on the U.S. stock market as early as next year. While SK Hynix has stated that nothing is confirmed, concerns are growing in the market.
Solidigm's largest shareholder, holding 96.86% of the shares, is AI Company, which in turn is 98.16% owned by SK Hynix. This means Solidigm is effectively a subsidiary of SK Hynix, and its revenue and operating profit are reflected in SK Hynix's consolidated financial statements.
Solidigm's primary product, enterprise SSDs (eSSDs), are devices used for storing large amounts of data in data centers. As the AI industry expands, the demand for storage space is expected to increase.
Concerns have arisen that Solidigm's IPO could negatively impact SK Hynix's stock price. Investors looking to invest in the growing eSSD market for AI data centers may choose to buy Solidigm shares instead of SK Hynix, potentially leading to a discount on the parent company's stock due to what is known as a holding company discount.
Currently, investing in SK Hynix indirectly supports Solidigm's growth, but if Solidigm goes public, it would have to share future profits with external shareholders. This could diminish the attractiveness of SK Hynix shares as direct investment in Solidigm becomes available.
On the other hand, some analysts argue that if Solidigm secures external funding, SK Hynix could save capital for investments in high-bandwidth memory (HBM) and view the IPO positively. Cathie Wood, CEO of ARK Invest, stated in an interview on October 16 that if SK Hynix retains its stake in Solidigm, there is no reason to view the IPO as a negative factor for the stock price.
Political reactions have also been strong. Kim Han-kyu, a member of the Democratic Party, expressed confusion over the decision to consider a 'dual listing' while SK Hynix's stock is plummeting, urging the management to reconsider. An Cheol-soo, a member of the People Power Party, warned that Solidigm's listing on the U.S. market could spell doom for the Korean stock market.
The extent of regulatory involvement is also a contentious issue, given that Solidigm operates under the U.S. intermediary AI Company. However, it cannot be assumed that the obligation to protect domestic shareholders disappears simply because it is a foreign subsidiary. The Financial Services Commission has proposed measures for dual listings that would require the parent company's board to evaluate shareholder impacts and protection measures even for overseas listings.
Lee Chan-jin, head of the Financial Supervisory Service, stated during a parliamentary audit on October 19 that Solidigm falls under the regulations for dual listings. However, he noted that whether it is subject to domestic securities filing requirements would depend on the Financial Services Commission's interpretation. Given that the company directly controlled by Solidigm is not SK Hynix but the U.S. entity AI Company, it is widely believed that applying such regulations will be challenging.
A financial industry insider commented, "The presence of a U.S. intermediary complicates the situation. Since this is a U.S. listing issue rather than a domestic one, the authorities may find it difficult to take action. It seems there are not many options available."
Will SK Hynix push for Solidigm's IPO until the end? How will the market react if the IPO proceeds? The eyes of 3 million SK Hynix shareholders are on the potential listing of Solidigm.
* This article has been translated by AI.
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