SK Hynix resumes after deletion of IPO Solidigm

SK Hynix's share recovered strongly on Friday after the company refrained from a possible US IPO of subsidiary Solidigm. The price was still about 3 percent lower earlier in the day, but then turned to a profit of more than 3 percent.

Investors seem relieved that a major uncertainty is off the table for the time being.

SK Hynix has recently been exploring various options to raise capital for Solidigm, including a pre-IPO financing and a US stock exchange listing.

Those plans led to criticism. According to some investors, a separate IPO could extract value from SK Hynix, while existing shareholders might benefit less from Solidigm's growth.

By cancelling the IPO, that value will remain completely within SK Hynix for the time being.

Regulation also played an important role. The South Korean financial regulator warned that a US listing of Solidigm could potentially violate rules around dual listings.

Those rules are intended to protect minority shareholders of the parent company. According to SK Hynix, the recent volatility in financial markets and the sharp correction in chip stocks also played a role in the decision.

This does not eliminate the financing problem. Solidigm wants to expand its production capacity due to the strong demand for memory for AI data centers.

According to SK Hynix, the current factories do not have enough capacity to fully absorb this growth. The company is therefore exploring other ways to finance a new American chip factory.

This becomes important because SK Hynix wants to continue to return money to shareholders through dividend and share repurchase at the same time.

The decision also comes at a sensitive time. The Nasdaq lost 2.6 percent on Thursday, Nvidia fell 4.4 percent and AMD more than 8 percent.

Data center companies are also under heavy pressure due to concerns about financing and the pace of AI investments.

For SK Hynix, the deletion of the Solidigm IPO is therefore positive in the short term. However, the bigger question remains how the company will finance billions in new capacity without putting pressure on shareholder returns.