The SK Hynix ADR listing is coming Friday. What it means for U.S. memory stocks
South Korean memory chipmaker SK Hynix is listing U.S. shares on Friday in the foreign equivalent of an initial public offering, and investors are bracing for more volatility in the already temperamental memory chip sector. The maker of DRAM and NAND flash memory components will issue 18 million new shares on the Nasdaq, seeking about $30 billion in capital, which the company will use to buy new Korean factories and photolithography machines, according to its Securities and Exchange Commission filing . The offering, using an American Depositary Receipt listing, will act a litmus test not only for SK Hynix but for the entire memory sector in the midst of the boom in capital spending tied to artificial intelligence. “If a record-sized memory ADR offering goes well, it will show that investors are indeed on board with the memory thesis within the AI narrative,” Ben Reitzes at Melius Research wrote to clients earlier this week. Nasdaq listing SK Hynix ADRs will trade on Nasdaq under ticker SKHY, and are expected to be met with solid investor appetite. “The U.S. brokers also are seeing demand from their clients,” JJ Kinahan, senior vice president at Cboe Global Markets told CNBC Tuesday. The question is whether that demand for stock from individual investors will shift capital away from other companies. Jordan Klein, a technology analyst at Mizuho Securities, questioned in a report this week whether the SK Hynix listing will create new buyers or simply attract investors who are already involved in the memory chip area. “Is it additive to Micron , SanDisk , Lam Research , and even Seagate Technology [and] Western Digital , or does it pull money out of those names?” he wrote. Reallocation from funds Analysts told CNBC they didn’t think the offering was going to ding U.S. memory chipmakers but that the offering might reallocate some money away from ETFs and mutual funds, as a new channel for direct investment in memory and semiconductors becomes available. “If you buy [an] ADR for a company like this rather than a fund, some money could flow that way,” said Mike Khouw, chief strategist at OpenInterest.PRO, a financial data, analysis and investment strategy consulting firm. “It’s not going to suck oxygen out of U.S. companies but it could adjust vehicles and free up access for self-directed” investments. DRAM 3M mountain Roundhill Memory ETF over the past three months Others are less sanguine. Several Wall Street trading desks warned this week that the Hynix offering could be a catalyst for further unwinding and profit-taking in the memory sector. Memory stocks bounced on Wednesday after falling amid a broader pullback in momentum stocks. The Morgan Stanley trading desk said in a note on Tuesday that the Hynix ADR supply presents a “case for more downside.” The UBS trading desk said that broader “positioning remains susceptible to further unwind,” particularly ahead of the “key catalyst” of the Hynix listing.
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