SK hynix shares swing on Solidigm U.S. IPO speculation

SK hynix Inc. shares swung on Monday as speculation resurfaced that its second-tier U.S. NAND flash memory subsidiary Solidigm Inc. could seek a New York Stock Exchange listing.

Shares of SK hynix closed at 1.768 million won ($1,299) on Monday, down 5.05 percent from the previous session. The decline came amid a deterioration in foreign investor sentiment as U.S. Treasury yields surged over the Korean holiday break, while market participants also cited speculation over a Solidigm initial public offering (IPO) as a factor behind the stock’s volatility.

Reuters reported on Friday that Solidigm was in talks with investment banks about a potential U.S. listing as early as next year.

Several investment banks reportedly took part in a “bake-off” last week, competing for underwriting roles. Solidigm is being valued at up to $150 billion, with the IPO expected to raise as much as $15 billion. If completed at that valuation, the listing would surpass the $54 billion valuation at which U.K. chip designer Arm Holdings Plc went public in 2023.

Speculation about a Solidigm listing emerged in early August, when reports said the company had selected a major U.S. investment bank as lead underwriter and was seeking pre-IPO funding. SK hynix shares plunged more than 10 percent in a single session at the time.

The pre-IPO investment is reportedly being led by Noh Jong-won, a former SK hynix president who now runs a U.S.-based private equity firm.

Noh led SK Group’s acquisition of Intel Corp.’s NAND flash memory and solid-state drive (SSD) business. He is reportedly seeking funding primarily from Middle Eastern sovereign wealth funds. The U.S. subsidiary of Seoul-based private equity firm Stonebridge Capital Inc. is also expected to participate. Stonebridge Capital has a long-standing relationship with SK Group.

The investment faces uncertainty from recently strengthened regulations on multiple listings.

SK hynix acquired the Intel business for $9 billion in 2020. In January, SK Group reorganized the business, transferring it to a newly established Solidigm subsidiary and renaming the existing Solidigm entity AI Co.

The restructuring created a five-tier ownership structure: SK Inc., SK square Co., SK hynix, AI Co. and Solidigm. Some market participants have raised concerns that a Solidigm listing could dilute the value of shares held by shareholders of existing listed companies SK Inc., SK square and SK hynix.

Those concerns have also put the IPO structure under scrutiny. The impact on SK hynix shareholders would depend in part on the balance between existing shares sold by SK hynix and new shares issued by Solidigm.

Observers noted that a larger secondary offering would send more cash directly to SK hynix, allowing it to recoup part of the $9 billion acquisition cost.

A larger primary offering, meanwhile, would give Solidigm more capital but increase the potential dilution of SK hynix’s stake. It could also allow SK hynix to share the cost of funding the subsidiary with outside investors, they said.

Solidigm is also reportedly considering building NAND flash memory production facilities in the U.S. Funds raised through the pre-IPO investment are expected to help finance the facilities.