Align Partners reveals 1.5% stake in SK Inc., sees 75% valuation discount
Headquarters of SK Group in Seoul / Korea Times file
Align Partners disclosed that it holds a 1.5 percent stake in SK Inc. through its fund, arguing that the holding company's share price does not fully reflect the value of its key subsidiary, SK hynix.
According to materials presented by Align CEO Lee Chang-hwan at the "13D Monitor Active-Passive Investor Summit" in New York on Tuesday (local time), the activist fund held 1,088,753 shares of SK Inc., representing 1.5 percent of the holding company's total outstanding shares.
Lee described SK Inc. as an opportunity to gain exposure to world-class artificial intelligence assets at a discounted valuation. SK Inc. holds a 32.2 percent stake in SK Square, which in turn owns about 20 percent of SK hynix. It gives SK Inc. an effective stake of roughly 6.5 percent in the chipmaker.
He explained that the value of SK Inc.'s indirect stake in SK hynix is subject to two layers of discounts due to its ownership structure.
Align estimated SK Inc.'s net asset value at around 100 trillion won ($75.5 billion), implying a discount of approximately 75 percent to its net asset value, based on the holding company's market capitalization of 24.9 trillion won as of Friday, excluding treasury shares.
The discount widens to 91.4 percent, according to the fund, when operating businesses are excluded and only net investment assets are considered.
Align also cited the potential for a valuation re-rating following the announcement of a new corporate value enhancement plan later this year, describing SK Inc. as an attractive investment opportunity.
In March, SK Inc. also resolved to cancel nearly 14.7 million treasury shares, representing 20.1 percent of its total issued shares, on Jan. 4 next year.
Align, however, clarified that disclosing its investment thesis did not necessarily signal the launch of a shareholder activism campaign.
SK Inc. shares rose 12.62 percent to close at 482,000 won on Wednesday, after surging as much as 15 percent during intraday trading.
At the same event last year, activist fund Palliser Capital called for a board overhaul and share buybacks at LG Chem. LG Chem shares also surged more than 13 percent on the first trading day following the announcement.