SK Hynix to price US offering at $149 per ADR, source says

SK Hynix plans to price its American Depository Receipts at $149, raising around $26.5 billion to fund new factories and equipment for its high-bandwidth memory chips.

South Korean chipmaker SK Hynix intends ‌to ​price its American Depository Receipts at $149 on Thursday to raise about $26.5 billion, a person familiar with the matter said.

The share sale decision comes as SK Hynix leverages its position as the leading supplier of high-bandwidth memory chips, a critical component for the advanced processors powering global artificial intelligence systems. The offering from the South Korean chipmaker, which will finance new factories and equipment to meet ‌surging AI chip demand, is set to be the world's second-biggest share sale after SpaceX's record-breaking $85.7 billion IPO last month.

Demand for SK Hynix's U.S. share sale was more than seven times available shares, another person familiar with the matter said, underscoring huge investor appetite for a pivotal company in the AI supply chain. SK Hynix declined to comment on the pricing and the demand for shares. The person declined to be identified as details of the share sale were confidential.

It will start trading on Friday under the ticker symbol "SKHY" on Nasdaq. It had ‌referenced a per share price of 242,500 won per ADR, based on the July 3 closing price in Seoul. On Thursday, the stock closed at 2,186,000 won and ten ADRs represent one common share. In addition to bringing in funds, SK Hynix's ‌U.S. listing is expected to help narrow its valuation gap with U.S. rival Micron , which despite having less market share in key memory products, has benefited from direct access to the world's largest pool of investors.

Micron trades at a 12-month forward price-to-earnings ratio of 6.66 times versus SK Hynix's 5.5 times. "SK Hynix leads on share and Nvidia proximity, Micron competes on power efficiency, U.S. positioning, and momentum from third place," said Daniel Newman, CEO of tech research firm Futurum Group.

Meanwhile, SK Hynix continues to battle its domestic rival, Samsung, for chip supremacy. Samsung Electronics remains the world's largest memory chipmaker by volume. HUGE SHARE GAINS REFLECTING SURGING EARNINGS

SK Hynix has ⁠made its fortune ​by becoming the most sought-after supplier of high-bandwidth memory chips, a culmination of ⁠14 years of bets that brought it skepticism and scorn but ultimately put it at the centre of the global AI gold rush. "As long as there is demand for graphic processors and AI data centers, SK Hynix is indispensable," said Yoo Hoi-jun, an electrical engineering professor at the Korea Advanced Institute of Science & Technology.

Nvidia ⁠CEO Jensen Huang said last month SK Hynix would continue to be the U.S. AI chipmaker's largest partner, adding that the current memory chip shortage would persist for a few years due to strong demand. Though shares in semiconductor companies globally have lost momentum in recent weeks, companies like SK ​Hynix and rival Samsung Electronics are sitting on historic gains as insatiable demand for computer chips to power AI data centres has sent profits soaring.

"AI demand keeps inflecting, currently driven by mostly by strong datacenter CPU demand. HBM demand also ⁠remains strong: we expect the market to grow from about $65 billion this year to $120 billion next year and about $290 billion by 2030," said Rolf Bulk, Head of Semiconductors and Infrastructure, Futurum Equities. SK Hynix shares closed up 5% on Thursday but have dropped by a quarter in the last two weeks. Even so, the stock is up 680% for the ⁠past ​12 months.

As dizzying as that long-term share jump has been, the shares have not outpaced massive gains in profits — earnings so huge that each employee is expected to get an annual bonus of about $574,500, making them highly sought-after marriage partners. Tellingly, the firm's 12-month forward price-to-earnings ratio has dropped, with its current level of 5.5 times down from 7.9 times at end-October.

"Memory is a classic boom-bust industry — Micron's around $5.8 billion net loss in the last downturn is a fresh reminder of what oversupply does," said Giuseppe Sette, co-founder ⁠and president of Reflexivity. "The discipline fueling this up-cycle depends on the three players NOT racing each other into overcapacity."

TRADE BEGINS ON FRIDAY The ADRs will start trading on the Nasdaq on July 10. Bank of America, Citigroup, Goldman Sachs and J.P. Morgan are ⁠the underwriters. The company's primary listing will remain in Seoul.

SK Hynix has said ⁠Baillie Gifford Overseas, investment funds managed by Coatue Management and Situational Awareness Partners have each indicated interest in purchasing up to a combined $7 billion of its U.S. ADRs. Lee Min-hee, an analyst at BNK Investment & Securities, said that contrary to some market expectations, he did not expect SK Hynix's U.S. listing to result in a major boost to its local shares.

Domestic companies still need to contend with ‌the so-called Korea discount — the tendency for them ‌to trade at lower valuations due to concerns about corporate governance, he said.