As SK hynix's Nasdaq shares outpace its Seoul stock, analysts are split on meaning

SK hynix's American depositary receipts (ADR), which began trading on the Nasdaq this month, are changing hands at level more than 50 percent above the company's shares in Seoul, a gap wide enough to divide analysts over what it signals.

Some are reading the premium as a sign that Korean chip stocks, long seen as undervalued, are finally being repriced. Others are calling it an early-listing quirk that will narrow as the two prices converge.

SK hynix's ADRs closed at $193.92 on Tuesday, up 27.29 percent. Each ADR represents one-tenth of an ordinary share, and at that proportion, the ADRs sat about 51 percent above the Seoul-listed shares, which closed at 1,913,000 won ($1,280) on the same day. The premium was just 3 percent when the shares priced last week.

Bloomberg said some gap was to be expected, since the two cannot be swapped freely or instantly, but called a premium above 50 percent unusually high.

Optimism about memory chips has fueled the run. Simon Coles, an analyst at Barclays, set a price target of $330 for the ADRs, nearly 117 percent above their Monday close of $152.35. He called chip shares “too cheap” and said a shortage of DRAM would deepen in 2027 as AI investment grows and would ease only marginally in 2028.

Options on the ADRs, which began trading Tuesday, added to the gains, though they also revealed some caution. About 150,000 contracts changed hands by midday, more than the 110,000 traded on the VanEck Semiconductor ETF, CNBC reported. But the most active directional bet was selling calls, a wager that the price would not climb much further. That showed plenty of investors were wary after the surge.

Scott Bauer, chief executive of the Chicago-based Prosper Trading Academy, said newly listed leveraged and inverse ETFs had siphoned off some of the short-term speculative money. He expected “a pickup in volume when they list the weeklies.”

The real question is whether the ADR premium will lift the value of the Seoul shares. ADRs can in principle be exchanged for ordinary shares, but the swap runs through a depositary and involves exchange rates, costs and time, which can open short-term price gaps.

For the optimists, the case rests on access. SK hynix can issue ADRs for up to 25 percent of its shares but tapped only 2.5 percent this time. That leaves ample room to expand.

“The ADR listing broadens investor access and the shareholder base, which can lead to a re-rating over the long term,” said Kim Min-kyu, an analyst at KB Securities. “As more ADRs come to market, the price gap between the U.S. and Korea can also adjust.” The analyst pointed to TSMC, the Taiwanese chipmaker, which managed its own premium by expanding its ADR share and was repriced along with its ordinary shares.

Taiwan's experience points the same way.

“When TSMC's ADR premium was 25 to 30 percent, foreign buying of ordinary shares actually increased,” said Kim Jae-seung, an analyst at Hyundai Motor Securities. “There is no need to see an ADR premium only as a reason for foreigners to leave domestic shares.”

Skeptics expect the gap to close. The wider it grows, the more institutional investors may try to profit by converting ordinary shares into ADRs and selling them in New York, but only when exchange rates, conversion costs, timing and liquidity leave a real gain.

“Over the long term, arbitrage tends to make the ADR and ordinary share prices converge,” said Jung Min-hee, an analyst at the independent research firm Aris. “What ultimately sets the direction of the stock is the company's earnings and growth, not the ADR itself.”

The ADR surge lifted sentiment in Seoul on Wednesday. The Kospi closed 6.24 percent higher at 7,284.41. SK hynix rose 8.83 percent to 2,082,000 won, back above the 2 million won mark, while its holding company, SK Square, jumped 16.13 percent and Samsung Electronics gained 6.27 percent. Foreign investors bought a net 2.3 trillion won. Two external factors also helped: softer-than-expected U.S. consumer prices for June, which eased fears of interest-rate increases, and a decision by U.S. President Donald Trump to drop a planned toll on the Strait of Hormuz.

BY PARK YU-MI [[email protected]]