“Canceling Treasury Shares, Issuing New Stock” — SK Hynix Turns to ADR Financing, Bringing Overhang Risk Into Sharper Relief

Expectations Build for a Revaluation of SK Hynix as ADR Listing Moves Forward
Global Fundraising Begins Amid Capital Expenditure Pressures and a Groupwide Financial Strain
Treasury Share Cancellation Followed by New Share Issuance Leaves Market Overhang Concerns Intact

SK Hynix is moving to list in the U.S. market. Taking into account the expanding capital expenditure cycle driven by competition in high-bandwidth memory (HBM), as well as the SK Group’s financial condition, the company has set out to raise funds through an American depositary receipt (ADR) listing. Even so, market concerns over dilution and overhang have proven difficult to dispel, as the company opted to fund the ADR through the issuance of new shares rather than treasury stock.

Potential Upside From a U.S. Listing

According to an SK Hynix filing on March 25, the company confidentially submitted a Form F-1 registration statement to the U.S. Securities and Exchange Commission (SEC) the previous day for a U.S. ADR offering. The target timeline is within this year, though the company said details including the offering size, structure, and schedule have yet to be finalized. Whether the listing proceeds will ultimately depend on a comprehensive assessment of SEC review results, market conditions, and investor demand. An ADR refers to a depositary receipt (DR) issued in the United States. A DR is a substitute security that allows a company’s shares to trade in overseas markets.

Industry observers say the ADR listing could lead to a market reappraisal of SK Hynix’s valuation. Last year, SK Hynix held a 57% share of the global HBM market, more than double that of U.S.-based Micron at 21%, while its operating profit reached $31.6 billion, well above Micron’s roughly $16.2 billion. Yet the market has not fully reflected such robust earnings in its valuation. SK Hynix trades at a price-to-earnings ratio (PER) of about 5.7 times, roughly half Micron’s 12.1 times.

On a simple calculation, assuming SK Hynix were to be accorded a Micron-level PER through the ADR listing, the company’s share price could surge to more than double its current level, into roughly the $1,270 range. If it is included in major global indices such as the Philadelphia Semiconductor Index (SOX), the possibility of large-scale passive inflows tracking those benchmarks cannot be ruled out. SK Group Chairman Chey Tae-won also remarked at Nvidia’s annual developer conference GTC 2026 on March 16 that “(SK Hynix) can be exposed not only to Korean shareholders but also to global shareholders, allowing it to become a more global company.”

Rising Need for Large-Scale Fundraising

The backdrop to SK Hynix’s aggressive push to raise capital through a listing appears to be the burden of massive facility investment. Having recently ceded leadership in sixth-generation HBM (HBM4) to Samsung Electronics, SK Hynix is stepping up efforts to expand production capacity. The company plans to invest more than $13.4 billion to foster Cheongju M15X as a dedicated HBM production hub, and it has also brought forward the launch of the first clean room at the Yongin cluster from May 2027 to February of the same year. To that end, $14.4 billion in new facility investment for the first Yongin fab will be executed on a priority basis by the end of 2030. In addition, the company plans to sequentially purchase extreme ultraviolet (EUV) lithography equipment from the Netherlands’ ASML by the end of 2027, with a total investment of $8.0 billion.

The SK Group’s financial condition may also have intensified the pressure on SK Hynix to secure funding. Since last year, SK Group has steadily pushed ahead with affiliate restructuring and asset disposals. As group-level funding strains became increasingly visible, driven in part by heavy capital expenditures at battery subsidiary SK On, the conglomerate moved in earnest to rebalance its portfolio. Major affiliates have supported efforts to stabilize the group by devising self-help measures including rights offerings and asset sales, while SK Innovation and SK On, previously viewed as sources of financial risk, have been reinforcing their fundamentals through a series of absorption mergers.

The problem is that the underlying risks weighing on SK Group have yet to be fully resolved. More than 70% of the group’s operating cash generation remains concentrated in semiconductors. That concentration can weigh on credit management. As debt-like capital financing instruments such as price return swaps (PRS) have increased, latent debt pressure has also intensified. Should investment returns fall short of expectations or market conditions shift abruptly, refinancing risk could rapidly come to the fore. In that context, funds secured by SK Hynix through an ADR listing could provide meaningful support in minimizing groupwide financial uncertainty and reinforcing liquidity.

2.1% Treasury Share Disposal, Listing to Be Funded With New Shares

Even so, market concerns over the “side effects” of an ADR listing continue unabated. SK Hynix plans to issue new shares equivalent to 2.4% of its total shares outstanding for the ADR listing. The company had originally sought to proceed with the ADR using treasury shares it held, also amounting to 2.4% of total shares, but the situation changed after criticism emerged that the move could be aimed at sidestepping a mandatory treasury share cancellation regime. In January, SK Hynix abruptly announced that it would cancel treasury shares amounting to 2.1% of its total shares, effectively signaling the collapse of its original listing plan.

A key motive behind SK Hynix’s decision to dispose of treasury shares without hesitation appears to have been regulatory change. Under the third revision to the Commercial Act, which took effect on March 6, companies wishing to continue holding treasury shares must obtain annual shareholder meeting approval, and any disposal is subject to stringent regulations on par with a new share issuance. In that sense, SK Hynix’s treasury share cancellation was effectively a predetermined course.

Adding to that, the cancellation of treasury shares would also have the effect of modestly increasing the stake of SK Hynix’s largest shareholder, SK Square. The largest shareholder of SK Square is SK Inc., which holds about a 30% stake, and Chairman Chey is the largest shareholder of SK Inc. with about an 18% stake. Ultimately, that means the cancellation was not a variable likely to undermine Chey’s control over SK Hynix.

The issue is that investors’ concerns over an overhang stemming from the issuance of new shares have not subsided. The newly issued shares will be held by the Korea Securities Depository, which must immediately deliver the underlying Korean shares when U.S. investors surrender the ADRs they hold. If the ADR price traded in the United States falls below the Korean share price, U.S. investors can surrender ADRs, obtain the Korean shares, and realize arbitrage gains. In this regard, one securities industry official said, “Looking at precedents set by domestic companies that previously went ahead with ADR listings, a substantial amount was converted into ordinary shares (Korean shares) and sold in the domestic market,” adding, “Demand for arbitrage trades exploiting price gaps between ADRs and ordinary shares is a risk existing investors cannot ignore.”