SK hynix investors test whether Korea's duplicate-listing rule can reach a $150 billion Solidigm IPO

Solidigm's valuation could reach as much as $150 billion in a listing, according to the reporting ^[7]. That ceiling is about 3.3 times the 60 trillion won (about $44.8 billion) of operating profit SK hynix booked in the second quarter alone ^[10][2]. Who keeps that value depends on two figures the reporting does not include: the size of SK hynix's stake in Solidigm, which it holds through AI Company ^[8], and the share of Solidigm that would be sold to outside buyers.

Nothing is settled yet. "The company says no listing has been decided, but media reports continue to say that preparations are underway," said Cho Dae-hyeon, an expert at Act's corporate governance research institute ^[3].

The shareholders argue that a listed Solidigm would let the market put a separate value on its NAND flash and solid-state drive businesses, and that this could push SK hynix shares down ^[9]. Solidigm would be the fourth listed company in the chain, after SK, SK Square and SK hynix ^[1]. In my view the worry is simple: a fund that wants NAND exposure buys Solidigm directly and stops paying for it inside SK hynix. SK hynix sees the same event the other way. It reportedly thinks a listing could get its Solidigm stake fully reflected in a valuation that has so far been driven mostly by high-bandwidth memory and DRAM ^[14].

Act's question to the Korea Exchange ^[1] has a limit that Cho states himself. "Because an overseas listing falls outside the Korean exchange's direct listing review, the company needs to explain how it has taken shareholder protection into account," he said. "The Korea Exchange also needs to set clear guidelines on the issue." ^[4]

From here the exchange could say its guidelines do not extend to overseas listings, which would leave shareholders with whatever the company chooses to disclose. It could instead write guidance that makes SK hynix explain how a foreign listing protects its own investors, as Cho asks. Or SK hynix could end the dispute itself by paying shareholders enough to accept the listing.

I'd expect the last. The company has already announced a 40 trillion won buyback and cancellation ^[12], equal to two-thirds of that second-quarter operating profit ^[3]. "We will pursue additional shareholder returns when it announces its third-quarter earnings," SK hynix said ^[13]. Kim Young-gun, an analyst at Mirae Asset Securities, said a listing is better seen "as a way to recoup investment from an acquisition and secure funding for further investment," and added: "If this is coupled with a shareholder return policy that meets global standards, it could further strengthen the company's standing." ^[16]

The counter-case is that Solidigm lists whatever the payout, because it needs the money. Capital raised in a listing could pay for new production facilities and research and development ^[15]. If Solidigm funds its own NAND capacity, SK hynix does not have to pay for it from the cash now going to buybacks or from the high-bandwidth memory and DRAM business behind its valuation ^[14]. If SK hynix shares rise on the day Solidigm prices, the company's view holds. If they fall while Solidigm trades near the top of its range, the shareholders' dilution case holds ^[9].