SK hynix has priced its Nasdaq offering of American depositary receipts at $149 apiece, setting the deal at about $26.5 billion.
The South Korean memory chipmaker said Friday it would offer 177.9 million ADRs, with each receipt representing one-tenth of a common share traded in Seoul.
The offer price translates into a roughly 2.9 percent premium to SK hynix’s closing price of 2.19 million won ($1,450) on the Korean stock market Thursday.
Large equity offerings are typically priced at a discount to prevailing market prices to attract investors, making the premium on the SK hynix deal unusual. The company said it was the first US initial public offering of its kind to be priced at a premium.
Orders during the book-building process were more than seven times the number of ADRs on offer, according to market sources.
Market sources said demand came from a broad range of institutional investors, including global long-only funds, technology-focused funds, sovereign wealth funds and Asia-focused investors.
At $26.5 billion, the offering would surpass the $25 billion raised by Alibaba in its 2014 New York listing, making it the largest US IPO by a foreign company, according to SK hynix.
The company also said the transaction would be the largest ADR offering on record and the second-biggest IPO in US market history, behind SpaceX’s roughly $85.7 billion offering.
SK hynix plans to use the proceeds to expand its production capacity, as the global race to build artificial intelligence infrastructure has driven demand for advanced memory chips.
According to a regulatory filing, the proceeds will help fund the first fabrication plant at the Yongin semiconductor cluster, the P&T7 advanced packaging plant in Cheongju and the purchase of manufacturing equipment.
The company has separately earmarked 11.9 trillion won for extreme ultraviolet lithography equipment to be installed by the end of next year.
The spending plans come despite concerns that the memory-chip upcycle may be approaching its peak, with industry forecasts pointing to tight supply and further market growth.
Market tracker Counterpoint Research has forecast that operating margins at Samsung Electronics, SK hynix and Micron Technology would average between 75 percent and 80 percent in the second quarter. The research firm expects the supply-driven boom to continue through at least next year.
The Nasdaq listing is also expected to help SK hynix address its valuation gap with Micron by making its shares more accessible to overseas investors.
SK hynix leads the global high-bandwidth memory market and remains well ahead of third-ranked Micron in DRAM market share and operating profit. Its price-to-earnings ratio, however, has been 20 percent to 40 percent lower than that of its US rival.
The company expects the listing to draw more global investors and provide greater flexibility in raising capital over the longer term.
SK Group Chairman Chey Tae-won said in March that the ADR listing would give the company greater exposure to US and global shareholders and help make it “a more global company.”
The offering could also bring SK hynix closer to its goal of building a net cash position of 100 trillion won, strengthening its ability to maintain large investments.
The new shares are equivalent to about 2.5 percent of its existing share count. SK hynix said the benefits of wider investor access and fresh capital would outweigh the dilution for existing shareholders.
The company plans to announce more detailed shareholder-return measures later this year.
Conditional trading on the Nasdaq is scheduled to begin Friday under the ticker symbol “SKHYV.” Regular trading under “SKHY” is expected to start Monday, with the offering due to close Tuesday.
Bank of America, Citigroup, Goldman Sachs and JPMorgan are acting as joint bookrunners.
Chey and SK hynix CEO Kwak Noh-jung are expected to attend an opening-bell ceremony at the Nasdaq MarketSite in New York’s Times Square on Friday.
By Jie Ye-eun (yeeun@heraldcorp.com)
