SK Hynix’s Solidigm Seeks Up to $7.2 Billion in Pre-IPO Funding

Solidigm, SK Hynix’s US subsidiary, is seeking outside investment ahead of a planned Nasdaq listing as it looks to expand capacity amid rising demand for NAND flash and step up facility spending.

Solidigm Pushes Pre-IPO

Market Sees Valuation at About $36 Billion

Talks Underway With Global Asset Managers, Sovereign Funds

Revenue Is Less Than 10% of Parent SK Hynix

Listing Possible Without Shareholder Approval

Solidigm Moves to Expand on Its Own

Solidigm, SK Hynix’s NAND flash subsidiary, is pursuing a pre-IPO fundraising of 5 trillion won to 10 trillion won, or about $3.6 billion to $7.2 billion, according to investment-banking industry officials on August 5. It has selected Morgan Stanley and Goldman Sachs as underwriters and is sounding out global alternative asset managers and overseas sovereign wealth funds.

The fundraising is part of preparations for a Nasdaq listing. In the market, Solidigm’s valuation is being discussed at around 50 trillion won, or about $36 billion. SK Group’s March appointment of former SK Hynix President Jin Jeong-hoon, a veteran of the company’s US business, as Solidigm co-chief executive officer was also viewed as a move made with fundraising and a listing in mind.

Solidigm has recently been pushing a transition to next-generation NAND technology and developing ultra-high-capacity enterprise solid-state drives, including a 245-terabyte eSSD that can store about 50,000 movies. The effort is aimed at meeting surging demand for high-capacity storage devices at artificial intelligence data centers.

The investment needs to be made while the NAND market is strong for the company to maintain its competitive edge.

“Shares of NAND companies such as Sandisk and Kioxia Holdings have climbed sharply recently,” an industry official said. “This is the right time to win a high valuation.”

SK Hynix posted record quarterly results in the second quarter, with revenue of 79.3187 trillion won and operating profit of 60.5426 trillion won. The company is not short of cash, but it said on a conference call that it would maintain “investment discipline” and avoid aggressively increasing spending during boom periods. The parent company’s investment is focused mainly on domestic production facilities in Cheongju and Yongin, meaning Solidigm will need to raise the funds it needs on its own.

Dual-Listing Concerns May Be Limited

Solidigm was established in the US in 2021 to house the business SK Hynix agreed to acquire from Intel in 2020 for about 10 trillion won, covering Intel’s NAND flash and SSD operations. Acquired or newly established subsidiaries can avoid the recently announced guidelines on duplicate listings.

Subsidiaries created through a spinoff must obtain approval from the parent company’s shareholders. Other subsidiaries can pursue a listing without that process if their revenue, operating profit and assets are all less than 10% of the parent’s.

Still, Solidigm could face a stricter standalone review if its revenue rises above 10% of SK Hynix’s by the time a listing is formally pursued, or if the Korea Exchange deems it an “important subsidiary.” Solidigm posted revenue of 9.1751 trillion won last year. That is well below SK Hynix, whose revenue is almost certain to exceed 300 trillion won this year.

“The purpose of the guidelines is to prevent losses for ordinary shareholders of the parent company,” another industry official said. “Regardless of the procedural requirements, the company will need to stay in step with shareholders to avoid friction.”

Industry officials also expect Hyundai Motor Group’s robotics affiliate Boston Dynamics to follow a similar path to a listing. Like Solidigm, it is an acquired subsidiary rather than one created through a spinoff, and the investment it needs is far larger than its current profit base would support.

“Semiconductors and robotics are industries with heavy investment burdens,” an investment-banking official said. “They need to raise outside capital in time to maintain a competitive advantage.”

Choi Da-eun, Hankyung.com reporter max@hankyung.com