In an attempt to capitalize on the strong investor enthusiasm for AI companies, South Korea’s SK Hynix announced on Wednesday that it aims to raise $29.4 billion through a U.S. stock market listing in what would be one of the largest listings globally.
If the deal is finalized at the top end, it would be the second-largest share sale following SpaceX’s record $85.7 billion IPO earlier this month, surpassing Saudi Aramco’s $25.6 billion IPO in 2019 and Alibaba’s comparable-sized offering in 2014.
Despite rising volatility in the U.S. tech and semiconductor markets, the anticipated IPO demonstrates a robust worldwide desire for AI-linked stocks.
It comes ahead of anticipated initial public offerings (IPOs) from AI-focused firms like Anthropic and OpenAI later this year, as well as weeks after record-breaking equity issuance elsewhere in the industry, such as Elon Musk’s SpaceX.
The biggest IT businesses in the world are raising equity and using debt markets to finance the expensive development of AI infrastructure.
Alphabet, the parent company of Google, announced earlier this month that it was seeking to raise $80 billion through equity sales.
U.S. INVESTORS’ ACCESS
According to Ryu Young-ho, a senior analyst at NH Investment & Securities, “The most alluring benefit for investors is that SK Hynix will trade on Nasdaq alongside rival Micron, and it allows the company to be re-rated in the U.S. market.
“As investors increasingly connect the two valuations, that might also be seen in its shares listed in Korea.
One of the most obvious winners of the AI boom has been the memory chip manufacturer, which is currently valued at over $1.2 trillion.
This year, its stock has increased fourfold, surpassing competitors Samsung Electronics and U.S.-based Micron.
This week, the business surpassed Samsung to become the most valuable company in South Korea. It is a major provider of high-bandwidth memory chips used in AI systems by clients like Nvidia and Google.
Strong demand for high-end memory used in AI data centers and anticipation for a U.S. listing have already contributed to the stock’s rise, according to CLSA Senior Analyst Sanjeev Rana.
The local shares must also represent that kind of expectation if they can obtain at least a value multiple comparable to Micron, for instance,” Rana stated. “I wouldn’t be surprised if this rally continues.”
In addition to helping the size of the share sale expand significantly from an earlier proposal that a source stated in March may raise as much as $14 billion, its explosive share price rally represents a spectacular reversal of fortunes for a chipmaker that nearly crumbled under debt two decades ago.
EXPANSION OF CAPACITY
The proceeds from the listing of American Depositary Receipts, according to SK Hynix, will be used to construct chip factories in South Korea and buy chipmaking equipment, including an extreme ultraviolet scanner manufactured by ASML, a Dutch equipment manufacturer whose shares increased 1.1% on Wednesday.
In the ADR listing on Nasdaq, the second-largest memory chip manufacturer in the world intends to issue up to 17.79 million additional shares, valued at 45.45 trillion won ($29.43 billion).
One common share will be represented by ten ADRs. Although the initial range is based on Tuesday’s closing price of 2.555 million won ($1,651.69), pricing will be finalized after bookbuilding.
“The ADR listing should not materially change our view on SK Hynix or the memory sector,” stated Allspring Global Investments portfolio manager Gary Tan, who is headquartered in Singapore.
The headline capital increase is small in comparison to its mid-term capital expenditure commitments and suggests only a little dilution.
According to SK Hynix, the offering is being managed by BofA Securities, Citigroup Global Markets, Goldman Sachs, and JPMorgan Securities.
