SK Hynix Inc is considering paying about 0.5 percent of the proceeds from its US listing — one of the largest share sales ever — to banks working on the deal, people familiar with the matter said.
While SK Hynix has indicated it would issue as much as 2.5 percent of its total shares, the final deal size — which would determine the fee amount — is not yet set, the people said. The company might also choose to pay discretionary incentives on top of the base fee, they said.
Based on the company’s latest market capitalization of about US$1.1 trillion, the offering could raise about US$26.5 billion, which would translate to more than US$130 million in total fees at the 0.5 percent payout rate.
Photo: Bloomberg
Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc and JPMorgan Chase & Co are leading the share sale.
SK Hynix has been a beneficiary of the hype around artificial intelligence (AI) as investors bet that demand for memory and storage would be a long-term growth story. The company is the top supplier of high-bandwidth memory after becoming the go-to provider for Nvidia Corp, the dominant maker of AI processors.
In the SK Hynix offering, the job for bankers should be made easier by investor familiarity with a company that has long been listed in its home country and has been one of the hottest names among global technology stocks this year.
One of the sources of uncertainty is the volatility of SK Hynix shares listed in Seoul. The stock has gone through wild gyrations last week, falling as much as 15 percent on Thursday and rising up to 10 percent on Friday. Even with a drop of 20 percent from last month’s peak, SK Hynix is still up 770 percent in 12 months.
Separately, the Bank of Korea (BOK) warned that single-stock leveraged exchange-traded funds (ETFs) tied to SK Hynix and Samsung Electronics Co could deepen market concentration, amplify volatility and intensify one-way trading flows, a local report said.
“With Samsung and SK Hynix accounting for more than half of stock market capitalization and trading volume, expanding investment in single-stock leveraged ETFs could further intensify this concentration,” the central bank said in a written response submitted to People Power Party lawmaker Park Sung-hoon, Yonhap News reported.
The central bank said the products could amplify one-way trading as inflows and outflows grow in response to shifts in business conditions or market expectations. It also warned that, in the event of a correction, losses for retail investors could widen, while increased redemptions or portfolio rebalancing could add to share-price volatility.
The BOK plans to enhance monitoring of the impact of single-stock leveraged ETFs on the stock market and financial system, Yonhap News reported. Last month, South Korea’s Financial Supervisory Service Governor Lee Chan-jin said he regretted not blocking their launch, warning their negative side effects have grown significantly.
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