SK hynix, Long Constrained in Korea’s Stock Market, Will Get Its Fair Value on Nasdaq

[Financial News] Optimistic forecasts are pouring in that SK hynix's listing on Nasdaq in the United States will do more than simply raise funds. Analysts say it could become a powerful catalyst for a fundamental revaluation of the company's worth. They add that the move could also offer a rare chance to ease the so-called Korea Discount, under which the chipmaker has long traded below Micron Technology, Inc.
According to the securities industry on the 26th, if SK hynix lists American Depositary Receipts (ADRs) on Nasdaq on the 10th of next month, about $1.5 billion, or roughly 2.3 trillion won, in new funds could flow in through local exchange-traded funds (ETFs) alone.
Mirae Asset Securities expects large-scale inclusion demand from major semiconductor index ETFs such as VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX), as well as Invesco QQQ Trust (QQQ), which tracks the Nasdaq index. After the initial listing, the stock is likely to be added sequentially to key semiconductor indexes such as the NASDAQ Composite Index and, next year, the Philadelphia Semiconductor Index.
As global mega passive funds and public pension fund money that can invest only in U.S.-listed stocks begin to flow in, SK hynix's investor base will expand to global heavyweights on a different scale.
Global investment bank HSBC Holdings plc said the Nasdaq listing would change the valuation framework for SK hynix. It applied a 20% premium to the company. HSBC raised the price-to-book ratio from 2.8 times to 3.4 times and lifted its target price by a steep 38%, from 2.9 million won to 4 million won.
HSBC said, "For the past 13 years, Micron has traded at an average valuation 35% higher than SK hynix, thanks to strong access for U.S. investors and shareholder-friendly policies." It added, "A U.S. listing is a key catalyst for narrowing this valuation gap." The move would allow SK hynix, the No. 1 player in the AI memory market for HBM, to shake off the frustration of being assigned a lower price-to-earnings ratio than Micron through a direct U.S. listing.

Some have raised concerns about dilution and fragmented supply and demand due to the new share issuance of 17.79 million shares, or about 2.5% of total outstanding shares. SK hynix will allocate new shares worth about 45.45 trillion won to overseas depositary institutions as underlying stock, and ADRs will be issued based on them.
Experts, however, see this less as a negative and more as an opportunity for a simultaneous rally. As in the case of TSMC, which listed on the New York Stock Exchange, if ADRs become popular in the U.S. market and trade at a premium, arbitrage with the domestic shares could become active. Investors would sell the relatively expensive U.S. ADRs and buy the cheaper Korean common shares, which could naturally push up the domestic stock price.
SK hynix said, "The funds raised will be used to expand AI memory production capacity and related investments." It added, "We will further strengthen our standing as a global company by expanding contact with global investors in the U.S. market, the center of AI technological innovation."
moon@fnnews.com Moon Young-jin Reporter