SK Hynix Inc yesterday scrapped plans for a potential US$10 billion US listing of its Solidigm unit after facing strong opposition from regulators and shareholders, becoming the latest firm to pull an initial public offering (IPO) while growing investor unease over the artificial intelligence (AI) boom rocks markets.
The retreat followed domestic regulatory scrutiny over concerns that Solidigm’s IPO could dilute share value for minority investors and complicate SK Group’s ownership structure. The South Korean chipmaker, which also halted discussions around pre-IPO investment, in a regulatory filing cited “recent capital market conditions.”
Solidigm, one of the world’s largest makers of flash memory critical to storage in data centers, is the latest high-profile firm to suspend or cancel an IPO. It joins data center developers Firmus Grid Ltd and AirTrunk in pulling back at a time fears of an AI bubble are roiling global markets.
Photo: AFP
However, in SK Hynix’s case, the withdrawal was driven largely by regulatory opposition in South Korea.
The controversy over Solidigm had become a test of Seoul’s efforts to improve corporate governance and minority shareholder protections — addressing the country’s chronic equity undervaluation, known as the “Korea discount.”
The decision is “a major positive for [South] Korean corporate governance,” said Ryan Albert, founder and managing member of Terton Capital. “Shareholders, governance groups and the regulator all weighed in, identifying the core conflict of the group keeping control of Solidigm.”
After the announcement, SK Hynix’s shares rose, defying a broad market slide triggered by a rout in US technology stocks. They had plunged about 60 percent from their June peak, battered by worries over slowing memorychip demand exacerbated by dilution fears.
The company in July completed the biggest-ever US listing by a foreign company, raising US$26.5 billion.
Solidigm had already picked banks including Goldman Sachs Group Inc and Morgan Stanley to work on the offering, looking to raise about US$10 billion, people familiar with the matter have said.
It planned to list as soon as next year, in a deal that would have valued the company at as much as US$100 billion, Bloomberg News has reported.
The market value of SK Hynix’s Seoul-listed shares is about US$679 billion, about half of their June peak.
SK Hynix at the time said that Solidigm was reviewing options to improve its business competitiveness. Now, the company sought to reassure investors that the decision to pull the deal does not reflect changes in the unit’s growth prospects or investment needs.
“In light of recent capital market conditions and share price trends, Solidigm determined that it was necessary to reassess whether an IPO would be the most beneficial option for SK Hynix and its existing shareholders at this time,” the company said in a statement.
The reversal follows concerns by South Korean regulators that the planned offering could amount to a duplicate listing.
Fibonacci Asset Management Global chief executive officer Jung In-yun said that the cancelation was positive for SK Hynix shareholders because it would ease concerns about dilution of the parent company’s economic interest in Solidigm, and the valuation discount associated with listing both a parent and its subsidiary.
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