FSS chief says putting Solidigm on Nasdaq would breach split listing rules

Korea’s financial regulators have concluded that a potential Nasdaq listing of SK hynix’s U.S. subsidiary Solidigm would violate the country’s rules against split listings, the head of the Financial Supervisory Service (FSS) said Monday.

“Both the Financial Services Commission [FSC] and the FSS take the view that it runs afoul of the split listing rules,” Lee Chan-jin, governor of the FSS, told the National Assembly’s National Policy Committee during its parliamentary audit on government bodies. “We will look into it in detail and do our utmost to take whatever appropriate measures are possible.”

SK hynix set up Solidigm in 2021 after buying Intel’s NAND flash and solid-state drive business. Recent reports that Solidigm is preparing a Nasdaq listing have stirred concern among shareholders of Kospi-listed SK hynix that they could lose out.

If Solidigm issues new shares to go public, those shareholders’ indirect stake in the subsidiary would be diluted, and the market could value SK hynix itself at a discount. No listing has been decided, SK hynix has said.

Financial authorities have banned split listings in principle since August and allow them only as exceptions. The rules are meant to protect existing shareholders when a listed company takes a subsidiary public separately.

A listing in the United States, however, would not go through a Korea Exchange listing review. That leaves regulators to settle two questions: whether Solidigm must file a securities registration statement in Korea and how much they can step in.

“On whether it is subject to securities registration in Korea, we are waiting for the FSC’s official interpretation,” Lee said.

Lee also acknowledged that the FSS had rushed its review of single-stock leveraged exchange-traded funds (ETF) to meet their listing schedule. The 16 ETFs, tied to Samsung Electronics and SK hynix shares, were listed on May 27. Most had lost more than 60 percent of their value by late July. Retail investors had booked about 2.3 trillion won ($1.73 billion) in realized losses on single-stock leveraged products by Aug. 14, according to figures from 10 major brokerages. Lee said Monday that the products were partly responsible for the market’s volatility, along with swings in Samsung Electronics and SK hynix shares.

ETFs normally go through FSS review of their securities registration statements only after the Korea Exchange finishes its preliminary listing review. For single-stock leveraged ETFs, the two reviews ran at the same time.

“We checked, and it appears so,” Lee said when Rep. Park Dae-chul of the People Power Party asked whether this was the first such case.

Park pointed out that ordinary ETFs take 62 days on average to list, while the single-stock leveraged ETFs took just 29.

“I believe it was around mid-April that the FSC announced the listing schedule as a matter of policy,” Lee said. “We did speed up the review to some extent to meet that schedule.”

BY PARK HYUN-JU [[email protected]]