SK Hynix (HXSCL), the South Korean memory-chip maker, is drawing stronger investor focus as UBS Group NYSE:UBS, the Swiss banking group, suggested that investors purchase the company's planned American depositary receipts and sell its Seoul-listed shares. UBS's sales and trading desk argued that the U.S.-listed securities may trade at a premium because they could be more efficient and cheaper to hold for investors such as hedge funds.
The company began the formal marketing process for its U.S. listing on Monday, seeking to sell ADRs representing about 17.79 million common shares, according to a filing with the U.S. Securities and Exchange Commission. Based on Friday's closing prices, those securities would be valued at about $28 billion, while SK Hynix's Seoul-traded stock has already surged more than 220% this year, pushing the company's market capitalization to around $1 trillion.
UBS noted that the ADRs could also attract global portfolio managers and retail investors who may have limited access to the Korean shares. A key issue for investors is whether the Korean stock can be freely exchanged into the U.S. ADRs, since limited convertibility could possibly lead the American line to trade at a distinct and persistent premium, similar to Taiwan Semiconductor Manufacturing Co. NYSE:TSMTS, the chipmaker whose U.S.-listed ADRs traded at an average 16% premium to its Taiwan shares this month.