Governance Forum: "We Welcome SK hynix's Halt of Solidigm's U.S. Listing"

"The Board Must Disclose Details of Its Deliberations"

The Korea Corporate Governance Forum welcomed SK hynix's decision on October 23 to halt Solidigm's U.S. listing. The forum said the listing should naturally be halted because the controversy over a "duplicate listing" of Solidigm stems from a conflict of interest between SK Group Chairman Chey Tae-won and ordinary shareholders. It also questioned whether the decision was made following deliberation and a vote by the board.

In a statement released that day, the forum said, "From the perspective of SK hynix shareholders, retaining 100% ownership is preferable to selling a stake in Solidigm," and added that it "welcomes [the decision to halt consideration of a listing]." The statement followed SK hynix's disclosure that day: "Solidigm, our overseas subsidiary, has been considering various financing options to expand production capacity and strengthen its competitiveness. However, after comprehensively considering capital market conditions and other factors, we have decided to halt consideration of a pre-IPO and an initial public offering (IPO)."

Solidigm was established in 2021 when SK hynix acquired Intel's NAND flash and solid-state drive (SSD) business. It has a complex ownership structure running from SK Inc., in which Chairman Chey Tae-won's stake is involved, through SK Square, SK hynix and AI Company to Solidigm. SK hynix shareholders have strongly opposed a potential Nasdaq listing of Solidigm, arguing that, as with the past duplicate listings of LG Energy Solution and Kakao affiliates, it would erode the value of existing shareholders' stakes.

The forum reiterated, "The essence of Solidigm's duplicate listing is the conflict of interest between Chairman Chey Tae-won and ordinary shareholders. The only argument that could justify it is that 'the funds are absolutely necessary.' But that premise does not hold, as SK hynix is expected to generate free cash flow of 167 trillion won in 2026 and 326 trillion won in 2027." It added, "Even if Solidigm, SK hynix's subsidiary one level below, needs tens of trillions of won for capital expenditures, SK hynix, which has abundant cash, could invest in Solidigm through AI Company."

In a statement released on October 20, the forum had also criticized the proposed listing, saying, "The concept is to leave the four-tier AI Company and five-tier Solidigm structures in the United States under controlling shareholder Chey Tae-won's control, while passing the cost of dilution solely on to ordinary SK hynix shareholders."

In the interest of shareholder communication, the forum also called on SK hynix Chairman Ko Seung-beom to disclose the board's deliberations on a Solidigm listing proposal. The forum asked, "We ask whether this decision was made after the board deliberated on the proposal and voted on it. Or does the disclosure simply reflect a decision by the controlling shareholder or management?" It added, "There may be various options for the growth strategies and capital allocation of the company, its subsidiaries and its affiliates. SK hynix directors should properly discuss the advantages and disadvantages of a pre-IPO and IPO for Solidigm, and the company should disclose the pros and cons of the various options from a procedural standpoint, as well as the rationale behind its final decision."

The controversy over SK hynix's efforts to list Solidigm also came under scrutiny at this week's National Assembly Political Affairs Committee audit. Following Financial Supervisory Service Governor Lee Chan-jin, Financial Services Commission Chairman Lee Eok-won also confirmed during a comprehensive audit the previous day that the proposed U.S. listing of Solidigm, SK hynix's subsidiary one level below, falls under regulations on "duplicate listings."

This content was produced with the assistance of AI translation services.