SK hynix plans to invest an additional 60 trillion won, bringing its total shareholder return for the year to 100 trillion won. This move is supported by profits from its investment in Kioxia, which will be used for a special dividend. The company's U.S. subsidiary, Solidaim, has decided to withdraw its IPO plans and focus on strengthening its competitiveness in the artificial intelligence (AI) data center storage market.
Gwak No-jeong, CEO of SK hynix, stated during a conference call on third-quarter earnings on October 28, "Sharing the fruits of strategic investments with shareholders is a management principle. As business growth and investment results accumulate, the returns shared with shareholders should also increase." This marks the first time Gwak has participated directly in a conference call since taking office.
SK hynix is implementing a policy of returning 100 trillion won to shareholders annually. This follows the announcement in August of a 40 trillion won share buyback, with an additional 60 trillion won now planned. The return will include over 30 trillion won in cash dividends and more than 60 trillion won in share buybacks and cancellations. This is part of a commitment to return over 50% of free cash flow (FCF).
During the board meeting, a cash dividend of 14 trillion won and a share buyback of 20 trillion won for the third quarter were approved. Of the newly purchased shares, 10 trillion won will be fully canceled, while the remaining 10 trillion won will be used for employee compensation. The compensation shares will not be included in the shareholder return total. The 40 trillion won share buyback completed last week will be canceled on November 5.
The proportions of dividends and share buybacks were determined with consideration for global growth companies. Dividends will be linked to performance, but if significant investment results are achieved, the amount of special dividends will be increased. Share buybacks will be conducted quarterly and will be adjusted based on cash flow.
The funding for this special dividend comes from profits realized from the sale of Kioxia shares. The 20,000 won per share dividend for the third quarter consists of a regular dividend of 10,000 won reflecting improved performance and a special dividend of 10,000 won sharing the success of the Kioxia investment. Gwak emphasized, "We will return the profits from our Kioxia investment realized this year to our shareholders so they can directly feel the results."
SK hynix invested approximately 4 trillion won in Kioxia (formerly Toshiba Memory) through a consortium in 2018. After several years of valuation losses, the company's value surged due to a recovery in the AI-driven NAND market, allowing for significant profits through the liquidation of shares in one special purpose company (SPC1) this year.
The profit from this liquidation is estimated to be around 20 trillion won. The utilization of the remaining investment in the convertible bonds of another special purpose company (SPC2) remains flexible. Chey Tae-won, chairman of SK Group, stated in July, "Once Kioxia secures stable momentum, we will decide whether to continue holding, recover funds, or strategically utilize it."
Solidaim has withdrawn its IPO plans and will focus on growth investments. Gwak explained, "The initial IPO plan was intended to secure funding for expanding production facilities through external capital and to enhance shareholder return capacity. However, considering recent fluctuations in the financial market and stock price adjustments, we determined that achieving the expected effects would be difficult."
However, the plan for production expansion itself will not be retracted. Gwak emphasized, "Solidaim will continue to strengthen its competitiveness in the AI data center storage market and secure growth opportunities."
Currently, Solidaim's only mass production base is in Dalian, China. To diversify production bases and mitigate geopolitical risks, the company has been considering establishing a NAND production line in the eastern United States. Gwak added, "Future investments and funding strategies will also be pursued in a manner that enhances corporate value and shareholder value."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.