SK hynix halts Solidigm IPO plan amid regulatory pressure

Potential government regulatory scrutiny may have been the main factor behind SK hynix’s decision to halt plans for a U.S. listing of its subsidiary Solidigm, according to industry sources Friday.

Earlier in the day, SK hynix announced that its U.S.-based NAND flash memory subsidiary will halt its review of potential pre-initial public offering (IPO) fundraising and IPO options, citing volatile capital markets and recent trends in semiconductor stock prices, the chip giant said Friday.

“Even though SK hynix cited market conditions, the government’s warnings may have played a greater role in the decision,” an industry source said.

After reports emerged in August that Solidigm was considering a U.S. IPO as early as next year, potentially valuing the company at up to $150 billion, concerns arose that the listing could undermine SK hynix’s shareholder value.

Since then, SK hynix has repeatedly responded to reports of a possible U.S. listing by saying that no decision had been made.

However, amid mounting controversy over Solidigm’s potential dual listing, financial authorities warned of regulatory scrutiny during parliamentary audits.

On Monday, Financial Supervisory Service Gov. Lee Chan-jin said Solidigm’s listing would violate rules on dual listings. On Thursday, Financial Services Commission (FSC) Chairman Lee Eog-weon said Solidigm’s U.S. listing would fall under the scope of the guidelines on dual listings.

If the guidelines apply, the boards of SK hynix and its parent company, SK Square, would be required to fulfill five obligations: assess the impact of the duplicate listing on the parent companies’ ordinary shareholders; establish measures to protect shareholders; communicate with shareholders or determine whether their consent is required; adopt a final resolution for or against the listing and notify the subsidiary; and disclose relevant information.

Alongside potential regulatory scrutiny, market volatility and a correction in semiconductor stocks also appear to have weighed on the decision. Pursuing a listing amid falling share prices could make it difficult to achieve the expected valuation and limit the benefits of raising external capital for existing shareholders.

The decision could ease concerns over both regulatory risks and shareholder value. “Solidigm’s withdrawal of its U.S. listing plan could ease concerns over SK hynix’s dual-listing risk,” said Yang Hyun-kyung, a researcher at iM Securities. “It could also ease worries about a dual-listing discount and equity dilution, as the decision addresses concerns over potential damage to shareholder value.”

As SK hynix said in its announcement, a U.S. listing had been considered a way to secure funding for U.S. production facilities and technology development, alongside the company’s direct investment, amid growing demand for enterprise solid-state drives used in artificial intelligence data centers.

Expanding Solidigm’s production capacity and strengthening its competitiveness therefore remain key priorities.

SK hynix could fund the facilities through direct investment and internal cash flow, but it must balance these needs against major investments in other businesses, including high-bandwidth memory.

Alternatively, Solidigm could attract outside investors to co-finance new factories or production equipment without going public.

SK hynix left the door open to a potential IPO in the future, saying it would continue to explore financing options to support Solidigm’s growth and enhance shareholder value.

“SK hynix will also continue to assess investment timing, scale and financing methods while exploring various options to support Solidigm’s growth and enhance value for existing shareholders,” the company said in a press statement.