SK Hynix Starts Trading on Nasdaq, Opens 14% Above Offer Price

23:51Yaira. Hi, David. Well, as we look at the broader market, we can now see that the Nasdaq has flipped. It is now positive, up about one-tenth of one percent, while the Philadelphia Semiconductor Index has trimmed its losses now, down just one-tenth of one percent. That said, this remains one of the most volatile corners of the market. Jonathan Krinsky over at BTIG had this amazing stat that the stocks has swung up 3 % or down 3 % 15 times over the last trading sessions. We haven't seen that since the year 2000. And now let's take a look at some of the biggest names in the chip trade and how they are performing.

24:29Micron, Intel, NVIDIA. We'll flip the board, but they were lower earlier. They are still falling. Micron down about 1%. Nvidia and Western Digital bucking the trend. Nvidia up 2.8 % as we await to absorb all this new supply from SK Hynix. Still waiting, Yahaira. Thank you very much. Appreciate that update on the markets and those chip stocks. We want to go back to the NASDAQ where Bloomberg's Ed Ludlow is standing by. Ed Brevereux, interview there that you just did. Your sense of where things stand here and your main takeaways from that interview that just took place. Well, I think we're very close to the start of trade.

25:02And the latest indicating opening for the ADR is$170. They priced it at$149, so it's about a 14 % premium. There was demand there, right? What was really interesting in the interview, and you guys played that soundbite, there's already questions in the market about how SK uses the ADRs on a sort of more regular and ongoing basis to raise capital. So like the record, as you put it, they raised$26.5 billion. It is a record for a first-time US share sale by a foreign company. But if you look at where SK Hynix is committed in terms of the capital commitments to expand capacity, the various projects it has, and SK Group more broadly across the AI stack,$26.5 billion doesn't seem like that big a number.

25:47We're just looking right now for the start of trade to happen any minute. As I said, the indication$170 per ADR, the pricing at$149. I think what Chairman Che said very clearly, right, was that they want to see price stability. They want to take a longer term view before they decide the when and how much of tapping ADRs. We also got into the idea more broadly in capital markets of bond issuance, which is like well at the heart of the history of the memory game back in the 2012 at the time that SK acquired Hynix. It's a different world now. Less cyclical. It's still cyclical. There's a lot to unpack.

26:24We'll get to that later. All right, Ed, thank you very much. Ed Ludlow down at the NASDAQ. He has another interview coming up here. Do stay with us. And I want to get back now to Bailey Lipschulz, Bloomberg Tech equity reporter, and pick up on what Ed was just saying a moment ago. That is the chairman's emphasis on getting price stability, stability of these ADRs. And maybe you can give us some insight into the challenges of that going forward. And of course, the point of reference for so many of our viewers is the SpaceX IPO of just a few weeks back. And we saw Newtonian physics and stark relief there.

26:50What goes up must come down, I suppose. What lessons can we take away from, yes, that listing, and how much of a challenge is it for this company, for a company to manage a listing like this one? Well, David, the difference is SpaceX was selling shares for the first time. There was no reference price. There was nothing really other than betting on Elon and kind of putting that idea together. SK Hynix does still trade in South Korea, so there at least is some floor and some real sense of valuation, and this is a company that's been public for quite some time, as Ed had mentioned. The big question to your point, though, We saw SpaceX open and trade much higher in the first two days and still trading around where it initially opened at.

27:26That's not great volatility, but not a terrible outcome. You look at Sarah Bross, a chipmaker that went public a number of weeks ago. Similar, tremendous opening first day, breaks issue price a number of weeks later after earnings. There's a lot of volatility in the chipmaking space. So if you're SK Hynix and you're an investor who took a position today, the big expectation is you want it to maintain a premium relative to the South Korean shares. Again, similar to Taiwan Semi, you don't really want to see this gut-wrenching volatility to the up and downside. We are awaiting, of course, the start of trade for SK Hynix's ADR on the NASDAQ.

28:00You can see there on the left of your screen a group gathered there of executives and others at the NASDAQ here in New York City awaiting the start of trade. It was priced at$149 per receipt. We have seen some vacillation in terms of what the expectation is for the open of those shares here as the morning has gone on. The latest indication, I believe, is$171. But as we were just talking about with Bailey Lipschel, these things tend to fluctuate. There's a lot of volatility between when a listing is priced and what happens, indeed, when they do start trading. Bailey, walk us through here as we see the applause.

28:28There may be an indication of the start of trade here. In fact, I think that it is. We see SK Hynix opening at$170. Again, the IPO price,$149. cheering, flags waving, an indication there on your screen of the current price$172.49 moving upward again from that opening price of$149. I should say the price that was targeted there by the company$149. Bailey, walk us through what happens next here. This is a process of digestion that takes place here over the next few hours, isn't it? It is. And David, back to your point on stability. Again, if you use an apple-to-apples comparison, that 18 % premium that we see for Taiwan Semi equates to about$171 for SK Hynix.

29:09So opening essentially in line with that premium, the big question to your point is, do we maintain kind of a floor? If you're a banker or if you're a market maker on this, you want it to stay in that 170 to 173 range, maybe a little bit below. But the big kind of mark of death, if you will, that we've seen with a number of these deals is initial rush of buy orders, retail pouncing, because they make a lot of market orders. You see a stock start to shoot higher, Maybe there's a volatility halt. And then you just see a lot of chop. That's one thing that these underwriters and that these market makers are going to try to avoid.

29:44Again, it's a completely different beast, though, because it is a more than$1 trillion market cap company. It does publicly trade in South Korea. So it's a bit of a different beast. But all things considered, just looking at the first few opening trades, what I'm seeing, I think most bankers and everyone on this deal would say, as of now, is a roaring success. Once again, the largest ever U.S. listing by a foreign company, looking at SK Hynix now trading on the NASDAQ, the price$149, seeing it trading around$170, so opening about 14 % higher than what was expected by the company. Again, a$26.5 billion ADR here on the NASDAQ.

30:18Bailey, before I let you go, you heard the comments from the chairman there just about the prospects for further expansion, their interest in maybe growing the size of this ADR, tapping the debt markets. Of what acute interest is that to investors at this point? Again, as they're processing all of this, as they're trying to put a price on this company relative to what they've seen in Seoul, how much are they thinking about the prospects of, again, another ADR or a larger ADR going forward? It's certainly top of mind. Again, this is a different beast. So you have really one-way fungibility. So you can take those South Korea shares and convert them into ADR.

30:49So that can expand the available shares for trading. That's different than what you would see with the SpaceX, where people are circling earnings and any kind of expectation around a lockup rush for investors to sell stock. The big question, though, to the chairman's point, if we look further out, if we look a year out when it's most likely in the NASDAQ 100, does that create more systematic demand that allows them to tap investors, raise capital, kind of bolster their balance sheet, but also further expand the float? Because right now, again, we are looking at a pretty tight float just because it is an IPO.

31:21So about 2.5 % call it of the total shares available for trading. That can lead to volatility. You want to get that to a bigger piece of the pie. Bailey, the last question, I said that was the last one, this one truly. If I'm sitting in Boise at Micron's headquarters, if I'm in Seoul at Samsung's headquarters, how am I processing what's happening here? What does this mean for the broader memory-making ecosystem, the broader global memory-making ecosystem? I think for Micron, it's game on. You've been trading at a premium to SK Hynix. This is their ability to narrow that premium. If you're sitting in Samsung's offices, I imagine you're thinking about what this could look like for you.

31:55We know Kioxia, the Japanese company, is planning on listing in ADRs sometime in the first half of next year. Is this the start of a trend, especially if we aren't in an AI bubble and this demand seemingly can be no longer cyclical but more fundamental? I think that's the question that those different teams are asking themselves. No doubt you heard what I did at asking the chairman of SK Group if he thought they could catch up to Samsung. and he demurring there a little bit, saying that's not the priority right now. How much of that was blustered, do you think? How much do you think that kind of binary competition between these two South Korean giants is really front of mind here?

32:29Yes, to the chairman of SK Group, but the company as a whole. Everyone wants to win, David, right? You've been covering markets long enough to know that you want to beat your rivals. I think, again, this is a moment in time that they now have the branding. They are now traded on the NASDAQ. They now are kind of opening up their company formally two U.S. investors, two U.S. retail investors. That's a big win. It goes back to the debate anthropic versus open AI and what that means. I think that's a big step forward. And whether or not people obviously know who SK Hynix is, this is a big step towards that name recognition, which Mandeep Singh had been making a few segments ago.

33:05Yes, indeed. Many will know more about it today. And we see SK Hynix again priced at$149, now trading at close to$175, so up 17 % from that initial price. And Bailey, I was struck by the way that the chairman talked about the stakeholders to whom he's responsible. And you've listened to many chief executives, chairman talk about this issue, but he says he has so many stakeholders. There are customers, there are shareholders, there are employees. Of course, the ADR is another one. Perhaps you could talk a bit about striking the balance after a moment like this one. Again, not a traditional IPO by an American company, a company domiciled here, but the way in which this opens the door to, I guess, having to prioritize one, perhaps more of those stakeholders more than in the past?

33:48Well, David, I think the thing that's interesting when we look at this entire ecosystem, you think about the, to your point and to the chairman's point, customers matter. You want to maintain a terrific relationship. We've had a lot of conversations over the last year, last year and a half about this notion of circular financing. Obviously that steps away from what SK Hynix is doing, but it's all part of a balance. As much as we've seen a rampant jump in demand for memory chips leading to jump in profits, leading to soaring stock prices, you still need to keep a balance with customers. This is an ecosystem that really does win when everyone is performing better and firing on all cylinders.

34:24The big question comes back to, is this going to play out like so many cycles of the past where there's a bottleneck now that gets addressed ultimately, and then someone's left holding the bag. The ticker SKHYV, excuse me, for the time being. That's slated to change here in the days ahead. SK Hynix now trading at the NASDAQ. $172 a share. Again, price is$149. I'm grateful to Bailey Lipscholz, my colleague here at Bloomberg News, for joining us as we saw the beginning of trade here in New York. Coming up, we're going to go back to the NASDAQ. Ed Ludlow is going to sit down with NASDAQ's president, Nelson Griggs.

34:55That's coming up on Bloomberg Tech. The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia-Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions and networking opportunities. Thank you to our summit advisor, Bangkok Bank. Learn more at bloomberglive.com slash SBS-Singapore. Welcome back. We want to go back to the NASDAQ now where Bloomberg's Ed Ludlow is with the president of that exchange, Nelson Griggs.

35:35Ed, over to you. Yeah, Nelson Griggs is NASDAQ president, And that went about as well as it possibly could have done, right? Yes, it did. Talk about the experience of it. It's a record in terms of your first-time U.S. share sale for a foreign entity. We keep saying that. But the mechanics of it, a feat, difficult to pull off? Well, I think a lot of the mechanics will be the underwriters. So let's give them all the credit in the world. J.P. Morgan running this transaction primarily as a stabilization agent. Not only stabilizing this trade, but they were the orchestrator. Let's call it that. You know, our job is to provide the capacity, the technology.

36:11You saw behind you the human intelligence and making sure that everyone knows what's happening with full transparency. So the, you know, all the book runners can communicate with their customers, which is, you know, the buy side, the investors who are making the bet on S.D. Hypes. Celebration is continuing behind us. So it's going to continue for a while, I think. No, it's good. It's interesting, like, this isn't very sophisticated, but it's a Friday. You know, does that play into it at all? Well, what are we seeing in the activity around that? I think most deals will price and trade on a Wednesday or a Thursday.

36:41Friday is not typical, especially during the summer. But I think you get to a deal of this size that has captivated the market. It had tremendous institutional interest. So I think it could have, you know, any day of the week would have been fine for SK Hynix. Nelson, one of the things I started the conversation with Chairman Che on was the idea that on an ongoing basis, ADRs are an interesting mechanism for them in the capital markets. And essentially what Chairman Chase said was, well, we'll look at some stability and give it some time. But yes, how would that work, the idea that you come back to the market on whatever cadence they choose?

37:16Sure. Well, companies typically will come back to the market. They'll be evaluating where they get the best valuation for those shares, whether it's in their local market or an ADR market. But the typical technology IPO will come back to the market several times to raise capital. This is a very seasoned public company. So they'll go through all those mechanics and say, where is the best place that you need to raise capital? It could be the debt markets. It could be the equity markets. And hopefully it's ADRs in the U.S. Do we need to make anything of where they price the ADR? You know, this morning on the Bloomberg, it was about this idea, OK, this is a 3 % premium over where the common shares in Seoul closed.

37:53The ADRs represent a tenth of one common share. You know, the back story is how much money do you or do you not leave on the table? That's always the question, right, for companies. And typically, if an IPO, let's say it's not an ADR, will benchmark off their current public comps. This is a combination. Okay, so what is the equity trading in Korea? Also, you have a large U.S. comp in Micron. So how do you find that balance? And that's where, again, I think J.P. Morgan did a very nice job here getting the price to a point where we've seen some nice upward price action. It's very stable at the moment.

38:27And I think they did just a great job. Chemin Che made an interesting point about maybe the rationale or so for doing this, which was not just the capital, the proceeds raised, but introducing SK to the American people, essentially. That was in the context of the talent perspective, right? A pipeline of talented people that might work for the company. From the NASDAQ side and your involvement through the process, how much do you take that into account? Quite a bit. And most companies will take that into account. So you look at being on a public stage, the global capital markets public is about$150 trillion in market cap.

39:05The U.S. is 70 % of that. I think being a public company in the U.S. does show as you want to attract talent. They're making significant investments in the U.S. Having a U.S. currency to do that is a big deal. And even a traditional IPO puts the brand component as one of the major reasons why they think about tapping the public markets. There is another big memory name and chip name in South Korea. It's called Samsung. How much have you been talking to them about doing something similar? We never talk about, you know, names on camera or in public until it becomes a point where it is public. But I think if you look at having moments where you have a successful offering, it does open up the eyes of others to say, does this make sense for us?

39:47So at the very least, companies who have an internationalist will say, how does this correlate to us? Do we have an investor pool to tap into? Do we want to think about the brand aspects? And then understanding, do they want to do another offering? Is there more broadly a pipeline, do you think, of technology companies outside of the United States that are looking at this and thinking this is getting that fair valuation? Yeah. Yeah. So I was actually just in Europe this week and meeting with a lot of companies. and if you look at this year of the top 10 raises, four have been international. Now, three of them, this is one of them with SK Honix, but you had Vending Spoons go public, PayPay, Ineo, very large deals that felt the US capital markets gave them the best valuation.

40:31I think we're having more of those conversations than ADR type listings, but both have a lot of momentum behind them. Is there a different speeds in those markets, Asian technology versus European technology that you're seeing? No, I wouldn't say that. I think most of the European ones are more the startup companies that have not listed anywhere yet. So they really look at the U.S. as a primary first listing, maybe the only listing. I think we do look at a lot of companies in Asia might have a local listing, and they think about ADRs. I've got one very quick niche question for you the team sent over, which is how is NASDAQ thinking about the prospect of more leveraged single-name products, ETFs?

41:07It's something that comes up a lot and has this week. Leveraged products under... under a single-name ETF for tech companies in particular. Yeah, we look at where the market demand is for things like that. There's market demand, and it's a product that we think is going to be appropriate for the market, regulated. You know, NASDAQ is a participant in innovation. We look at how we address market needs. Nelson Griggs, NASDAQ president. Wonderful to be here. On an exciting and important day here at the NASDAQ. David, back to you. Ed, appreciate that. Ed Lettle again there with President Nelson Griggs of the NASDAQ.

41:36And we have more on the technology fueling the chip frenzy of today. Joining us now is Subramanian Ayer, distinguished professor of engineering at UCLA, founding director of the Center for Heterogeneous Integration and Performance Scaling. Yes, put that together. It spells chips if you do the first letters of each of those words. He's a former IBM fellow professor. Great to have you with us. And I want to go back to this interview. And there was a moment during the conversation in which the chairman of SK Group talked about the prospect of there being memory as a service. I'm curious sort of how nascent that is, what it means exactly, and how much that represents kind of the future, the prospects of memory going forward.

42:11That's fantastic. That's actually a very good lead-in to this discussion. So why is memory so important today, right? I mean, it has always been very important. And to a large extent, high-performance computing, whether it be classical high-performance computing or artificial intelligence-focused computing, has always been memory-limited. However, how you use that memory is changing. All right? And if you look at the latest product that comes out of most of the memory companies, including SK Hynix, including Samsung, and it is the integration of logic with memory and trying to actually produce more intelligent memory chips.

42:57Now, how you do this actually depends very much on the architecture of your system. and it involves integrating sort of a very high performance logic chip along with the memory so the memory is no longer just a sort of a dumb piece of bits okay a bunch of bits but something that is a little bit more intelligent okay and i believe that is what people are looking to do with memory so go away from the sort of commodity model of memory and say hey look maybe maybe Maybe the way to do this is to configure the memory ourselves and allow the user to use that configuration as they wish. We have too short a time, but I do want to ask you sort of to situate this company in that pantheon of Samsung, Micron, yes, SK Hynix.

43:49When you look at sort of the work that it's doing and what it's pioneering, where does it stand relative to those other two companies? Actually, currently, I would say that SK Hynix is in a very, very dominant position. They actually command the largest fraction of what is called the HBM market, the high bandwidth memory market, which is really what's fueling all this growth. And they have actually struck some good sort of collaborations or supplier relations with the major sort of logic company, TSMC. They have excellent technology. And I think all that is coming together very nicely. and they're very well poised to actually benefit from this boom in AI.

44:35A point that the chairman made is that they're very singularly focused on memory and maybe that stands to benefit them going forward. I wonder if you agree with that, that they have a very unified sense of what they're doing. Yes, they are focused on memory. They don't have a logic technology. Samsung does have a logic base as well. and they're sort of focused on collaborating or using TSMC technology. That actually is a double-edged sword, in my opinion. But for the moment, it's a good strategy, okay? Whether it is the right strategy long-term, I don't know. Professor, thank you very much. That's Super Mandy and I here joining us from Los Angeles.

45:16He's a distinguished professor of engineering at UCLA. We'll have him back on. We'll talk about assembly and packaging and interposers as well, all of which are his specialties. In the meantime, let's get back to Bloomberg's Yahira Anand, who is here to talk a bit more about the opening of trade for SK Hynix on the NASDAQ. Hi, David. Well, it is off to a strong start, up about 16 % from its offering price of$149. And the strong debut validates what the order book had been signaling, that this deal was more than seven times oversubscribed with total demand of nearly$200 billion. And SK did not even need to sweeten the deal, pricing its ADRs at a premium to its South Korean shares.

45:58And investors are showing that they're willing to pay up for direct U.S. exposure. And I will also say what this means for the broader market, that this, at least for now, quiets concerns of investors pulling back from the AI trade, since we have seen quite volatile sessions for the chip sector as of late. It's an incredible surge from that price of$149, Yahaira. Thank you very much for that update here on this Friday afternoon. Again, as we can pick apart the comments from the chairman of the SK group that took place with Ed Ludlow at the NASDAQ, saying this is a dream come true for him. Ed pointing out early on this has been in the works for a very long time, finally coming to fruition here in New York.

46:34We see it trading at$170, a receipt now up 14 % from that initial price. and as mentioned just a moment ago, certainly a relief to the NASDAQ, to this company as well, just to see that performance out of the gate. But as we talked about over the course of the last hour with Bailey Lipschulz, Mandeep Singh, there's often volatility on the heels of this and we'll continue to monitor that throughout the day here on Bloomberg Television. That does it for this edition of Bloomberg Tech. Don't forget to check out our podcast. You can find it on the terminal as well as online on Apple, on Spotify and iHeart.

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