SK Hynix Pauses Solidigm IPO, Balancing Shareholder Payouts and Growth Spending

SK Hynix has stopped an IPO review for its Solidigm unit, a division that requires a new facility in the US. The stock initially declined as much as 3%, recovered nearly all of that loss, and ended the trading session up 4%.

On Monday, South Korea's Financial Supervisory Service (FSS) indicated that a US listing could potentially violate regulations prohibiting dual listings, according to CNBC. The company cited unstable market conditions as the reason for the decision.

Did Regulators or Markets Cause the Solidigm IPO to Be Halted?

Solidigm's facilities have limited capacity to expand output as demand for AI memory rises.

FSS Governor Lee Chan-jin noted that officials were considering whether the IPO required a review under rules protecting minority shareholders.

In its statement, SK Hynix explained that a downturn in semiconductor stocks led it to reconsider whether an IPO was in the best interest of shareholders.

The company stated that neither Solidigm's prospects nor its capital expenditure needs have changed.

Can SK Hynix Build a US Fab and Increase Payouts?

SK Hynix had previously considered the IPO a way to finance new factories while maintaining dividend payments and share buybacks.

Separately, a listing could have allowed Solidigm to be valued independently. The company says that its current valuation does not reflect the unit's growth story.

Payouts had already been increasing, as the board approved a 40 trillion won buyback and share retirement program in August.

Additionally, the company increased its payout target to more than 50% of cumulative free cash flow through 2027.

The statement does not detail any alternative to the IPO. SK Hynix is still deciding on the timing, amount, and method of financing for any future investments.

Meanwhile, the Korea Composite Stock Price Index (KOSPI) had already suffered a chip-driven AI selloff earlier this week.

In the US, the Nasdaq Composite fell 2.6% on Thursday, its worst session since June, as reported by CNBC.

AI data center operators also declined, with CoreWeave dropping 10% on Thursday and Australia's NextDC losing nearly 40% on Wednesday.

In contrast, Nvidia CEO Jensen Huang told CNBC that he does not anticipate a memory chip oversupply by 2029.

SK Hynix stated that it will share details on payout plans with its third-quarter earnings, which a filing shows are scheduled for Oct. 28.

South Korea's chip exports rose 222.5% compared to a year ago in early October. However, the KOSPI declined 20.72% over 10 sessions through Oct. 20.