SK hynix halts review of Solidigm US IPO

SK hynix Inc. said Friday it has decided to suspend plans for the listing of its US subsidiary Solidigm, citing market conditions.

Reports have circulated that Solidigm was considering an initial public offering in the United States as early as next year, potentially valuing the subsidiary at up to $150 billion.

"We have decided to halt its review of a pre-IPO fundraising round and a subsequent IPO after taking into account overall capital market conditions," the South Korean chipmaker said.

However, the company said its commitment to investing in Solidigm's growth remains unchanged and that it will continue to explore alternatives to enhance shareholder value.

The decision comes amid strong opposition from shareholders and regulatory scrutiny over concerns that a separate listing could undermine the interests of minority shareholders.

South Korean financial regulators have said the planned offering could constitute a so-called "duplicate listing," potentially diluting the value of existing shareholders' stakes.

Solidigm sits within a multilayered corporate structure from SK Inc., SK Square Co., to SK hynix, raising concerns that a separate listing could exacerbate the so-called holding company discount, in which a parent company's stock trades below the value of its underlying assets.

Earlier this week, Lee Chan-jin, governor of the Financial Supervisory Service, said both the Financial Services Commission and his agency viewed Solidigm as subject to restrictions on duplicate listings.

However, SK hynix said tighter government restrictions on duplicate listings were not the direct reason for its decision.

"Our assessment of the economic benefits of an IPO and the need to support Solidigm's growth has not changed," a company official said, asking not to be named. "The decision was made from the perspective of shareholder value, taking current market conditions into account."

The decision also comes as financial market volatility has increased and semiconductor stocks have undergone corrections.

US NAND flash memory maker Sandisk Corp. has seen its shares fall about 40 percent from their peak in June.

Industry observers say the pullback in peer stocks has prompted renewed questions over whether Solidigm could command its originally anticipated valuation in an IPO.

SK hynix had considered an IPO as a way to raise external capital to secure new production facilities in the US and meet growing memory demand in the artificial intelligence era.

An IPO could have boosted the company's consolidated cash flow, providing greater financial flexibility for facility investments and shareholder returns, including dividends, and share buybacks and cancellations, the company had said.

A successful listing could also have enhanced Solidigm's growth potential, which SK hynix believes is not fully reflected in its own corporate valuation, to be reassessed by the market.

SK hynix had been weighing various options, including direct investment and raising external capital through an IPO.

Solidigm, based in California, is SK hynix's second-tier subsidiary specializing in NAND flash memory and solid-state drives. The company was established in 2021 after Intel Corp.'s NAND flash memory and SSD business was acquired by SK hynix. (Yonhap)