- US listing may help narrow valuation gap with Micron
- AI stocks have lost ground, but SK Hynix up 680% over past year
- Stock surge reflects earnings gains, PE ratio has declined
SEOUL, July 9 (Reuters) - South Korea's SK Hynix priced its American Depositary Receipts at $149 on Thursday raising about $26.5 billion, a U.S. regulatory filing showed, highlighting strong investor appetite for a pivotal chipmaker in the AI supply chain.
The share sale comes as the company leverages its position as the leading supplier of high-bandwidth memory chips, a critical component for the advanced processors powering global artificial intelligence systems.
SK Hynix priced the listing at a 2.7% premium over its average share price in the last three trading days, the company said in a filing on Friday to the Korea stock exchange. Chip stocks have lost some momentum in recent weeks after a stellar run, partly due to investor concerns about slower AI spending.
SK Hynix shares were trading up 2.8% in Seoul at the open on Friday, lagging the wider market's 4.5% gain.
Demand for SK Hynix's U.S. share sale was more than seven times available shares, a person familiar with the matter said on Thursday.
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.
The U.S. shares will start trading on Friday under the ticker symbol "SKHY" on Nasdaq. The company had earlier referenced a per share price of 242,500 won ($160.80) per ADR, based on the July 3 closing price in Seoul. On Thursday, the Korean shares closed at 2,186,000 won and 10 ADRs represent one common share.
The offering from the South Korean chipmaker will finance new factories and equipment to meet surging AI chip demand.
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.
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 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.
"SK Hynix holds the edge in production scale and maturity. Across the board, since demand is far outweighing supply, they have had tremendous pricing power," said Ken Mahoney, CEO of Mahoney Asset Management.
"So, generally speaking, their first mover advantage is and was their strength."
LOCAL SHARES
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.
($1 = 1,508.1000 won)
Reporting by Hyunjoo Jin; Additonal reporting by Tom Westbrook, Brenda Goh and Heekyong Yang; Editing by Edwina Gibbs and Arun Koyyur
Source: Reuters