Kioxia Holdings, IPO Ceremony at 11 AM
SK Hynix Becomes Third Largest Shareholder Upon CB Conversion
Nikkei Expresses Concern Over Possible Loss of Management Control to Hanmi Major Shareholders
SK Hynix's indirectly invested Japanese memory semiconductor NAND flash manufacturer Kioxia Holdings (formerly Toshiba Memory) was listed on the Tokyo Stock Exchange Prime Market on the 18th. It is the last major initial public offering (IPO) of the year. Japanese media analyzed that the key to Kioxia's future success depends on SK Hynix.
Kioxia's stock price was recorded at 1,509 yen (approximately 14,100 KRW) as of 10:05 AM on the same day. Based on the public offering price of 1,455 yen, the expected market capitalization is 784 billion yen (7.334 trillion KRW).
There are concerns that Kioxia's stock price may not receive as much momentum as expected in the early stages of listing due to the current slump in the NAND flash market. Kioxia initially set a market capitalization target of 1.5 trillion yen. The public offering price was lowered after investor demand surveys, causing the expected market capitalization to fall to about half of the original target. This reflects investors' concerns about the NAND flash market conditions.
Bloomberg Japan explained, "Investors are expressing concerns about the prolonged slump in the NAND flash market. Although prices are somewhat maintained due to the construction of data centers, the industry as a whole has not reached a strong recovery." A representative from Mitsubishi UFJ Asset Management also stated, "There is no strong demand. The poor memory market conditions are the background."
Additionally, it is analyzed that the impact of sluggish smartphone sales during the COVID-19 pandemic and geopolitical risks such as the possibility of stricter semiconductor regulations on China by the next U.S. Trump administration are increasing uncertainty. However, the global increase in demand related to artificial intelligence (AI) is seen positively in terms of future value. Previously, market research firm Omdia predicted that the NAND flash market size will increase by 50% to $91.1 billion (130.9835 trillion KRW) by 2025 compared to this year.
Some analysts suggest that Kioxia needs to adopt a strategy to increase the proportion of memory production dedicated to data centers in the future. Nikkei diagnosed, "The current market conditions can be seen as stagnant, but AI demand is expected to expand after 2025." Sankei Shimbun reported, citing a Kioxia official, "Although the market capitalization is lower than initially expected, the timing of the listing was decided considering the future expansion of data center demand."
There is also analysis that Kioxia's future direction depends on SK Hynix's movements. Kioxia is currently funded 56% by a Korea-U.S.-Japan consortium including Bain Capital and 41% by Toshiba. SK Hynix holds 19% of the consortium's 56% stake and also owns convertible bonds (CB) that can secure an additional 15% stake in Kioxia. If these are converted into shares after listing, SK Hynix will become Kioxia's third largest shareholder after Bain Capital and Toshiba. Although there is an agreement to hold only about 15% of voting rights until 2028, SK Hynix can expand its investment afterward.
Accordingly, Nikkei also mentioned the possibility of SK Hynix's involvement in management in the future. Nikkei stated, "Kioxia conducted integration negotiations with Western Digital (WD)'s memory business last year, but SK did not agree, causing controversy," and added, "If Kioxia fails to increase corporate value as intended after listing, there is a risk that the Korean and U.S. major shareholders may take over management control."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
