SK Hynix plans to list as ADR on U.S. stock market

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South-Korean chipmaking firm SK Hynix is reportedly planning to list as an ADR on the U.S. stock market as early as this week, as per a Bloomberg report. The projected value of the listing in $29 billion, making it the largest ADR (American Depositary Receipt) offering on record in U.S. markets. 

The update comes amid an uneasy stance employed by investors who are placing money into AI-stocks but doing so factoring geo-political risk into account. 

South-Korean chipmaking firm SK Hynix is one of the few frontrunners in the AI-infrastructure boom alongside other companies, who are seeking to tap the growth present in the sector through equity and debt funding instead of using up their cash and cash equivalents to absorb the cost of capital expenditures, which are often measured in the billions.

SK Hynix is planning to open two factories for chipmaking purposes. The cost is estimated to run into 100s of billions of dollars. 

An ADR (or American Depositary receipt) allows SK Hynix to gain valuable equity funding, but the listing does not place it as an official U.S. equity. Instead, the ADR allows investors to buy shares through a different instrument. 

The update follows mixed market behavior in Asian indexes with the following movements noted at the time of writing:

• ASX 200: -0.15%
• Nikkei: -0.01%
• Nifty 50: +0.67%
• HSI: +0.85%
• Shanghai: -0.06%

Asian chipmakers are helping to drive a considerable part of the boom, but the companies are also driving extensive volatility in the markets with frequent capital rotations between defensive and growth sectors. 

Gold continues to hover around the $4,200 mark, showing gains over the past three days and signs of recovery from its drop from its all time high of $5,600 in January. (source: Goldprice.org)

Summary

The update could signal positive growth as the listing could place SK Hynix in the NASDAQ100’s ETF traded under the Invesco QQQ Trust Series. The core risk of this offering is foreign exchange currency risk due to its being listed as an ADR, as its value can fluctuate depending on the value of the currency the share is commonly denominated in, in this case, the South Korean Won. 

SGFX Research Desk notes that, should SK Hynix's ADR meet the eligibility criteria, it could in principle become a candidate for inclusion in the NASDAQ-100 index. Any such inclusion would be subject to formal index rebalancing decisions and is not guaranteed.

Research references

• TIKR terminal data
• CNBC data
• SK Hynix Seeks Access to AI Investors in $29 Billion US Listing - Bloomberg
• Stock Market Today: Dow, S&P Live Updates for July 6 - Bloomberg
• Goldprice.org

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