SK hynix's potential Solidigm IPO conflicts with shareholder protection rules: watchdog chief
Financial Supervisory Service Gov. Lee Chan-jin attends a National Assembly audit in Yeouido, Seoul, Monday. Korea Times photo by Shim Hyun-chul
Korean regulators believe SK hynix’s potential listing of its NAND flash memory subsidiary Solidigm in the United States would run counter to rules governing listings of both parent companies and their subsidiaries, Financial Supervisory Service (FSS) Gov. Lee Chan-jin said Monday.
“We are continuing to monitor the Solidigm issue. Both the Financial Services Commission (FSC) and the FSS consider it to conflict with those rules,” Lee said.
He was responding to Rep. Park Sung-hoon of the main opposition People Power Party during a National Assembly audit. Park accused SK hynix of leaving domestic shareholders uninformed while explaining to the U.S. Securities and Exchange Commission that listing a subsidiary could adversely affect the parent firm’s share price.
Solidigm was established in the United States through SK hynix’s $9 billion acquisition of Intel’s NAND flash memory business.
SK hynix has maintained that no decision has been finalized on an initial public offering (IPO), saying Solidigm is exploring ways to strengthen its competitiveness.
Still, expectations of a stock market debut have grown following reports that Solidigm appointed IPO underwriters and established a government affairs team to support its U.S. expansion. Market speculation suggests the offering could raise $10 billion and value the company at up to $100 billion after listing.
The practice of listing both a parent company and its subsidiary has raised shareholder protection concerns, as a reduction in the parent’s stake could dilute its existing shareholders’ economic interests.
Solidigm’s earnings currently go entirely to SK hynix. If Solidigm issues new shares to outside investors, it would have to share future earnings with those new shareholders.
To address such concerns, Korean regulators have prepared a framework that prohibits parent-subsidiary listings in principle, while allowing exceptions.
Lee’s comments indicate that authorities view Solidigm’s potential listing as conflicting with that framework.
However, overseas subsidiaries fall outside the Korea Exchange’s review of parent-subsidiary listings, leaving authorities to determine whether domestic securities filing obligations and other relevant provisions apply to Solidigm.
“The FSC is awaiting an authoritative interpretation of whether Solidigm would be subject to securities filing requirements in Korea,” Lee said. “We will pursue all appropriate measures available.”
He added, “We will also convey our concerns to SK hynix through an appropriate channel if we can.”