SK Hynix Weighs Growth Over Governance in Treasury Share Strategy [Treasury Share Report]

[Korea Financial Times, Gwak Horyung] SK Hynix continues to walk a fine line between business pragmatism and corporate governance controversy in its approach to treasury share management.

The chipmaker has repeatedly deployed its treasury shares as a financial shield during liquidity crises, drawing criticism over shareholder value erosion — yet it has ultimately used the capital secured through such measures to make preemptive investments in next-generation technologies such as HBM (High Bandwidth Memory), delivering impressive earnings growth in the process.

KRW 15 Trillion U.S. ADR Listing in the Works

SK Hynix recently disclosed that it submitted a registration statement (Form F-1) to the U.S. Securities and Exchange Commission on the 24th, seeking to list American Depositary Receipts (ADRs) in the United States, targeting a listing in the second half of this year. The move signals management's determination to drive share price appreciation through growth, despite some concerns over equity dilution.
While SK Hynix has stated that the specific listing structure has yet to be finalized, market participants widely expect the company to proceed via a new share issuance. This would allow the company to raise the substantial capital needed for its massive artificial intelligence (AI)-related investment program. Existing shareholders face the risk of equity dilution, but the expectation is that a U.S. listing could prompt a valuation re-rating and lift the share price.

SK Chairman Chey Tae-won remarked at Nvidia GTC 2026 on the 17th that listing SK Hynix in the U.S. would give the company "exposure to American and global shareholders, enabling it to become a more global company."

The listing is expected to raise between KRW 10 trillion and KRW 15 trillion. SK Hynix had initially considered using its existing treasury shares for the U.S. listing. However, this approach appears to have become untenable following the enactment of the third amendment to the Commercial Act, which in principle requires acquired and held treasury shares to be cancelled. At a board meeting held on January 28, SK Hynix resolved to cancel all 15,300,000 of its treasury shares held for purposes other than employee compensation — out of a total holding of 17,378,298 shares. Based on the current share price of KRW 873,000 per share, the cancelled shares are valued at approximately KRW 13 trillion 360 billion.

Nevertheless, criticism has emerged that cancelling treasury shares only to replace them with newly issued shares amounts to little more than a shell game. The Korea Corporate Governance Forum stated in a commentary that while it supports the ADR issuance, it opposes a new share issuance that would dilute existing shareholders' stakes given the company's ample free cash flow. The forum also noted that beyond a simple ADR listing, reducing governance risk — specifically by insulating the board's decision-making process from group-level influence — is essential for a genuine corporate value re-rating.

By contrast, SK Hynix President Kwak Noh-jung has set a target of accumulating KRW 100 trillion in net cash as a financial goal, arguing that a significantly stronger balance sheet is necessary to meet the explosive surge in memory demand driven by the AI era.

Net cash is defined as cash and cash equivalents — including short-term financial instruments with maturities within one year — minus total borrowings. As of end-December 2025, SK Hynix held KRW 34 trillion 940 billion in cash and KRW 22 trillion 250 billion in borrowings, leaving net cash at approximately KRW 12 trillion 690 billion. "Until last year, everything went toward paying off debt, and we have only just started to accumulate net cash," Kwak said. "Generating results requires a certain level of cash, and continued investment is necessary to sustain growth and push the share price higher."

A Shield in Downturns, a Reward in Upturns

As of January 2025, SK Hynix held 17,378,298 treasury shares, representing 2.5% of total issued shares. Of these, 88% — or 15,300,000 shares — were fully cancelled in February. The remaining shares are earmarked for annual employee bonus payments.

All treasury shares currently held by SK Hynix were acquired after the company's incorporation into the SK Group. In 2015 and 2018, the company made large-scale treasury share purchases of 22,000,000 shares each, for a combined total of 44,000,000 shares, with the stated purpose of stabilizing the share price and enhancing shareholder value through the maintenance of an appropriate share price level.

However, critics point out that until the recent announcement of the first-ever cancellation of 15,300,000 shares, the treasury shares had not been utilized for their stated purpose of enhancing shareholder value.

Most notably, in 2023, the company issued exchangeable bonds (EB) backed by 20,140,000 treasury shares to navigate a liquidity crisis triggered by the memory chip downturn. While this was described as an unavoidable choice in the face of a credit rating downgrade, it ultimately undermined the original rationale for the share buybacks, which had been marketed as shareholder-friendly. Treasury shares that should have been cancelled to boost per-share value were instead transformed into potential overhang — essentially a pool of shares that could be converted and sold by investors seeking capital gains. Since the second half of last year, the company's share price has been trading at more than eight times the exchange price, making the overhang risk an increasingly tangible concern.

The planned disposal of remaining treasury shares for employee compensation has also drawn fire for being inconsistent with the original stated purpose of the holdings. The National Pension Service (NPS), which holds a 7.89% stake in SK Hynix, voted against the agenda item on the "treasury share retention and disposal plan" at this year's annual general meeting. The NPS stated that it opposed the plan because "disposing of treasury shares for employee compensation purposes is inconsistent with the shareholder value enhancement objective disclosed at the time of acquisition."

Gwak Horyung (horr@fntimes.com)