SK Hynix ADR jumps 6% in pre-market trade after $29 billion buyback plan

SK Hynix Inc’s US-listed ADR jumped 6% in premarket trading on Wednesday, 19 August, after the memory chipmaker announced plans to buy back and cancel 40 trillion won ($29 billion) worth of treasury shares and allocate more than 50% of its free cash flow generated between 2025 and 2027 toward shareholder returns.

SK Hynix said it would buy back and cancel up to 24 million treasury shares between 20 August and 19 November. The share buyback and permanent cancellation would reduce the company’s total outstanding share count, which would, in turn, increase earnings per share (EPS) and raise the proportional ownership stake of existing shareholders without requiring additional investment from them.

Nvidia suppliers SK Hynix and Samsung Electronics have faced growing pressure from investors to return a larger share of excess cash through dividends or share buybacks after record profits fuelled by booming demand for AI memory chips.

The premarket gain in US-listed shares followed a 9.2% decline on Tuesday amid a broader Wall Street technology sell-off. Its primary South Korean listing also fell 9.75% in Seoul trading on Wednesday.

Company raises shareholders' return pledge

The company raised its shareholder-return pledge to more than 50% of cumulative free cash flow generated between 2025 and 2027, equivalent to about $170 billion, according to Bloomberg calculations.

This expands its previous policy framework, which limited shareholder returns to within 50% of cumulative cash flow. SK Hynix will distribute this capital through share buybacks, share cancellations, and cash dividends.

SK Hynix’s buyback plan follows the $26.5 billion it raised just a month ago through a US listing, which came amid heightened market excitement around the AI rally. However, since then, investors have grown concerned about the durability of AI hardware spending and have increasingly demanded higher shareholder payouts.

Shares turn volatile after massive run in June

SK Hynix has been one of the biggest beneficiaries of the artificial intelligence boom, thanks to its leadership in high-bandwidth memory (HBM) chips, a critical component used in AI accelerators.

Investor enthusiasm for AI propelled the stock sharply higher from late 2022, making it one of the best-performing semiconductor stocks globally and resulting in an 807% surge over two years on the KOSPI exchange through June.

However, the shares have now fallen more than 50% from their record high reached in June, as investors increasingly question whether the rapid surge in AI-related spending has pushed valuations beyond underlying fundamentals.

In June, the stock made a stellar debut on the Nasdaq, with its US-listed American Depositary Receipts (ADRs) surging 13%, marking the largest-ever US listing by a foreign company.

One objective of SK Hynix’s US listing was to expand access to overseas investors and move beyond the limitations of the Korean market, even though the company did not immediately require additional capital.

It now has a pool of investors trading its more highly valued ADRs, while the company is able to cancel some of its less valuable Korean shares. The ADRs were trading at a premium of about 40% to the shares in Korea as of the market close.

(With inputs from Bloomberg)

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