SK Hynix debuts on Nasdaq. Will that reduce its ‘Korean discount’?

As global chip giant SK Hynix makes its Nasdaq debut on Friday, the listing will test whether the stock can pull off a long-term “Korean discount”.

“Korean discount” refers to the tendency of South Korean companies to trade at lower prices compared to global peers due to concerns about corporate governance and opaque conglomerate structures.

A listing on Nasdaq through American depositary receipts, or ADRs, is set to give SK Hynix direct access to the world’s deepest pool of cash, a move experts argue could reduce the discount.

LSEG data showed SK Hynix trades at just 4.8 times trailing 12-month earnings, compared to 29.84 times the industry and US rival. Micron technology6.6 times, despite its leadership in the fast-growing bandwidth memory, or HBM market.

“We see room for that gap to narrow with the ADR listing, although we don’t expect the Korean discount to close completely,” Rolf Bulk, head of semiconductors and infrastructure at Futurum Group told CNBC.

The difference in price-earnings ratios between Micron and SK Hynix is ​​mainly due to “access” and “familiarity,” as SK Hynix’s limited access to US funds has kept its valuation low for years despite its strong position in AI memory, said Zavier Wong, market analyst at multi-asset trading platform Toro.

“The rise of Hynix’s stock is not the same as the decline of the discount, so while its price increased, the gap against Micron did not stop,” Wong said.

Shares in Micron are up nearly 250% this year, while SK Hynix is ​​up 240%, LSEG said.

Peter Kim, global investment strategist at KB Financial Group, emphasized that the listing should also improve access to overseas investors who have historically faced barriers to buying Korean shares.

“More access could help global investors trade Hynix stock, which trades at a discount to KOSPI, Micron, and Samsung,” he said. “A Nasdaq listing would be a major factor in reducing that discount, as the listing requirements required for listing would ease some concerns for American investors.”

Nasdaq listing rules require companies to meet financial and liquidity restrictions, including minimum market capitalization, public float, shareholder count and share price requirements. Listed companies are also subject to corporate governance standards that include areas such as audit committees, director independence and shareholder voting rights.

With the ADRs priced at $149 each and the IPO oversubscribed, the company will raise about $26.5 billion, but analysts say access to American investors may ultimately prove more important than the capital itself.

Ji Cheong, associate director at S&P Global Ratings, said that while SK Hynix’s IPO will partially support its growing capex, which is forecast to be 50 trillion to 70 trillion won annually over the next two years, most of it will be financed by internal revenue.

“The company is expected to generate more than 200 trillion won in annual revenue within the next two years,” Cheong added.

However, Wong expects that the listing will help strengthen SK Hynix’s ability to fund expansion and could pave the way for other US initiatives, including buybacks, greater investor involvement and broader expansion into the American market.

The listing also comes as investors assess whether SK Hynix can maintain its lead in the fast-growing HBM market supporting AI accelerators.

Rayliant lead portfolio manager Philip Wool said SK Hynix had become “something of a victim of its own success,” as explosive demand for HBM far outstripped its ability to supply the market.

That created an opportunity for Samsung Electronics and Micron to accelerate investment in competing products while securing their supply agreements with hyperscalers looking to diversify their AI chip supply chains.

Futurum Group’s Bulk expects SK Hynix to remain the top supplier of HBM, although its market share is likely to drop from around 57% last year to around 50% this year before falling to the low 40% range later as Samsung gains and Micron becomes the third largest player.

The biggest challenge is not market share but volume. “The real debate is less about the quota and more about who can bring online the capacity to meet it,” said Bulk, adding that even the announced expansion of the fabric remains insufficient to meet the expected demand by the end of the decade.