SK Hynix shares sink 3% as Solidigm scraps $10 billion IPO on regulatory hurdles

The South Korean chipmaker also halted discussions around pre-IPO investment, SK Hynix said in a regulatory filing Friday. Solidigm also blamed “recent capital market conditions.” Solidigm, one of the world’s largest makers of flash memory critical to storage in data centers, is the latest high-profile firm to suspend or cancel an initial public offering. It joins data center developers Firmus Grid Ltd. and Airtrunk in pulling back at a time fears of an AI bubble are roiling global markets.

In SK Hynix’s case, however, the withdrawal was driven largely by regulatory opposition in South Korea. The controversy over Solidigm had become a test of Seoul’s efforts to strengthen corporate governance and minority shareholder protections — addressing the country’s chronic equity undervaluation, known as the “Korea discount.” The decision is “a major positive for Korean corporate governance,” said Ryan Albert, founder and managing member of Terton Capital.

“Shareholders, governance groups and the regulator all weighed in, identifying the core conflict of the group keeping control of Solidigm.” SK Hynix’s shares had plunged about 60% from their June peak, battered by worries over slowing memory-chip demand. That decline was exacerbated by dilution fears. On Friday, SK Hynix’s shares were largely unchanged despite a broad market slide triggered by a rout in US technology stocks.

SK Hynix said the decision doesn’t reflect changes in Solidigm’s growth prospects or investment needs. “In light of recent capital market conditions and share price trends, Solidigm determined that it was necessary to reassess whether an IPO would be the most beneficial option for SK Hynix and its existing shareholders at this time,” the company said in a statement. The reversal follows concerns by South Korean regulators that the planned offering could amount to a duplicate listing.

Jung In Yun, chief executive officer at Fibonacci Asset Management Global, said the cancellation was positive for SK Hynix shareholders because it would ease concerns about dilution of the parent company’s economic interest in Solidigm, and the valuation discount associated with listing both a parent and its subsidiary. “It’s great news” that the company won’t pursue a duplicate listing, said Namuh Rhee, chair of the Korean Corporate Governance Forum. “It’s a sign that the company is aware of conflict of interest between Chairman Chey and minority shareholders.”