SK hynix pulls back from Solidigm IPO following shareholder opposition, regulatory pressure

SK hynix said on Friday that it has suspended plans to list its indirect subsidiary Solidigm on the U.S. stock market, roughly 80 days after preparations for the initial public offering (IPO) first came to light in August.

“Considering recent capital market conditions and stock price trends, we concluded that we need to reassess whether an IPO would be the most beneficial option for SK hynix and its existing shareholders at this time,” SK hynix said in a regulatory filing. “We have therefore decided to suspend our review of both a pre-IPO investment round and an IPO.”

Solidigm was established after SK hynix acquired Intel’s NAND flash memory and solid-state drive (SSD) operations in 2021.

SK hynix had been pursuing a Nasdaq listing for Solidigm to secure funding for production facilities in the United States and investments in technology.

However, the company decided to halt the listing process after shareholders opposed the move, arguing that Solidigm’s separate listing would deepen the so-called parent-company discount, in which the market value of a parent’s stake in a subsidiary is not fully reflected in the parent’s share price.

Under the current ownership structure, SK Inc. controls SK Square, which in turn controls SK hynix; SK hynix controls AI Company and Solidigm. SK Inc., SK Square and SK hynix are all publicly listed companies. Solidigm accounts for approximately 13 percent of SK hynix’s corporate value.

Pressure on SK hynix also mounted after senior financial regulators raised the possibility of applying restrictions on split listings, also referred to as duplicate listings, in which a subsidiary goes public while its parent is already listed.

Financial Services Commission (FSC) Chairman Lee Eog-weon said that Solidigm’s proposed U.S. listing would be “subject to the guidelines on split listings” at a comprehensive parliamentary audit of the National Assembly’s National Policy Committee on Thursday.

“The guidelines on split listings apply to both overseas and domestic listings,” the FSC chairman said. “As parent companies, SK Square and SK hynix must fulfill the five obligations based on their fiduciary duties to shareholders.”

Financial Supervisory Service (FSS) Gov. Lee Chan-jin also addressed the issue at a parliamentary audit on Monday.

“We are continuing to monitor the Solidigm issue,” the FSS governor said. “We will also consider ways for the FSS to convey its concerns about split listings to SK hynix.”

Semiconductor industry sources cited a broader downturn in chip stocks as another factor behind the decision, following growing calls for a slower pace of AI investment and macroeconomic volatility, including rising U.S. Treasury yields.

SK hynix shares have fallen more than 35 percent on the Kospi over the past month. Shares of Sandisk, which also produces NAND flash memory, have dropped around 40 percent from its June peak.

With semiconductor stocks declining across global markets, concerns grew that Solidigm would struggle to secure its anticipated valuation even if it proceeded with the listing.

SK hynix, however, left open the possibility of reviving the IPO, emphasizing that Solidigm’s growth potential and need for investment remain unchanged. The company believes that if Solidigm secures an appropriate market valuation through an IPO, it could also increase shareholder value at SK hynix.

“Attracting external capital through an IPO would increase SK hynix’s consolidated cash flow, which allows us to secure funding for capital expenditures while also strengthening our capacity to return capital to shareholders through dividends, share buybacks and cancellations,” an SK hynix representative said.

“[A listing would also] allow the market to reassess Solidigm’s growth potential, which is not yet fully reflected in SK hynix’s corporate valuation,” the representative added. “We will continue to explore various options that can support Solidigm’s growth while maximizing the interests of existing shareholders, taking into account the timing and scale of investments and how they will be financed.”

Securities analysts said the decision could boost SK hynix shares.

“Suspending the review of Solidigm’s U.S. listing could help ease concerns surrounding split listings at SK hynix,” said Yang Hyun-kyung, an analyst at iM Securities. “Because the decision reflects shareholders’ concerns about potential damage to shareholder value, it could reduce fears of a valuation discount and equity dilution associated with a separate subsidiary listing.”

BY KIM KYUNG-MI [[email protected]]