Two Questions Concerning SK Hynix's ADS Issuance and the Three Mega-Projects
- The notion that an ADS listing will secure a Micron-style valuation is a naive illusion
- Only when shareholder rights are protected and board independence is secured can an equity valuation re-rating become possible
- Two Questions Concerning the Three Mega-Projects:
1) What lies behind the W 1,100 trillion "Future Business and Management Plan," equivalent to 74% of market cap?; and
2) Has the plan been approved by the board? - Chairman Ko Seung-Beom should convene the board without delay, deliberate on the W 1,100 trillion "Future Business and Management Plan," and determine, together with the independent directors, whether to adopt a formal resolution; capital allocation is a core responsibility of the board
- SK Hynix's board has considerable room for improvement in its composition. Six independent directors — Chairman Ko, Director Jeong Deog-Kyoon, Director Kim Zeong-Won, Director Yang Dong-Hoon, Director Sohn Hyun-Chul, and Director Choi Gahng-Gook - must themselves make a concerted effort to secure genuine independence
Foreign investors hold approximately 50% of SK Hynix's issued shares. The American Depositary Shares (ADS), scheduled to list on NASDAQ on July 10th, are structured in which newly issued common shares (equivalent to 2.5% of the existing issued shares) are allocated to a third party and deposited with an international depositary institution. On June 24th, the board of SK Hynix resolved that the purpose of the ADS listing is to "expand the global investor base," and that the purpose of the equity capital raising is "capex funding."
The controlling shareholder of SK Hynix is SK Square (20.5% stake). Major shareholders include the National Pension Service (NPS, 8.1%), as well as leading global asset managers and asset owners such as Capital Research (3.5%) and BlackRock (5.1%) etc. During the global roadshow to ensure the success of the ADS offering, the management would have been asked, in concentrated fashion, the following two questions by both existing shareholders and by prospective investors - questions that overshadow any discussion of memory supply-demand outlook or technological innovation:
1) What is the substance of the W 1,100 trillion "Future Business and Management Plan," representing 74% of the company's market cap, which was publicly disclosed on June 29th?
2)Chairman Chey Tae Won unveiled a massive investment plan at a government-led national briefing - was this plan approved by the board of directors?
According to the company's own disclosures, the W 1,100 trillion "Future Business and Management Plan" related to the "Three Mega-Projects for a Great Leap Forward of the Republic of Korea" has neither an implementation timeline nor a board resolution behind it. Although certain portions - such as the Yongin Semiconductor Cluster and the Cheongju production complex - overlap with the stated purpose of the ADS capital raise, the paramount concern of shareholders is apprehension.
Former Financial Services Commission (FSC) Chairman Ko Seung-Beom, who assumed the chairmanship of the board this past March, is urged to convene the board without delay, receive a detailed report from management on the W 1,100 trillion "Future Business and Management Plan," and then determine, jointly with the independent directors, whether to adopt a resolution. Capital allocation — that is, investment in the future (capex, R&D, and M&A) and capital returns (dividends and treasury stock) — is a core function of the board.
The "Future Business and Management Plan" is a litmus test for the amended Korean Commercial Code. The amended Code has clarified the duty of care and the duty of loyalty owed by directors as fiduciary managers. When deliberating and resolving on a project of this scale - one that carries risks equivalent to 74% of market cap — the board must give thorough consideration to a full range of alternatives and select the rational option that most proportionally maximizes the interests of all shareholders. Following the final decision, the board must, for the sake of procedural legitimacy, transparently disclose the relative strengths and weaknesses of each option considered and the rationale for the choice ultimately made.
The standing of Chairman Chey, who on June 20th took the unusual step of personally announcing a large-scale, long-term investment direction, is itself an issue. Under the Monopoly Regulation and Fair Trade Act, Chairman Chey constitutes the same person (동일인) for the SK Group; he is the chairman and registered director of SK Inc, the ultimate parent holding company, which may carry conflict of interest with SK Hynix. Yet at SK Hynix itself, he holds only the title of Chairman - an unregistered, non-executive position. According to Korean disclosures, his role at SK Hynix is described as "Chairman," whereas the F-1 registration statement filed with the U.S. SEC characterizes his duties as "Visionary Stewardship." Chairman Chey also holds no direct equity stake in SK Hynix. The fact that a person who is neither a member of the SK Hynix board nor a registered director of the company publicly announced a massive investment plan prior to board approval runs counter to the OECD Principles of Corporate Governance. We urge each operating entity within the SK Group to exercise its own independent judgment through its own board of directors.
SK Hynix's management and board may be harboring the expectation that, once the ADS listing achieves a "broader global investor base," the company will naturally be valued at levels comparable to Micron or other leading U.S. semiconductor firms. This is a profoundly naive notion. An ADS listing does not, in itself, translate into an equity valuation re-rating. A re-rating can only occur once governance has been improved. The board must be insulated from Group-level influence, transparency must be enhanced, and every decision must be made, in accordance with the amended Korean Commercial Code in a manner that "protects the interests of the total shareholders and treats the interests of all shareholders equitably."
SK Hynix's board of directors has considerable room for improvement in its composition. Of the six independent directors, four are academics and former public officials with no business experience whatsoever. We ask for rationale for the appointment of former Financial Services Commission (FSC) Chairmen to chair the boards of two leading companies - SK Hynix (Ko Seung-Beom) and Samsung Electronics (Shin Je-Yoon). The six independent directors - Chairman Ko, Director Jeong Deog-Kyoon, Director Kim Zeong-Won, Director Yang Dong-Hoon, Director Sohn Hyun-Chul, and Director Choi Gahng-Gook - must themselves undertake the effort to secure genuine independence.
July 9th, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee
Two Questions Concerning SK Hynix's ADS Issuance and the Three Mega-Projects
1) What lies behind the W 1,100 trillion "Future Business and Management Plan," equivalent to 74% of market cap?; and
2) Has the plan been approved by the board?
Foreign investors hold approximately 50% of SK Hynix's issued shares. The American Depositary Shares (ADS), scheduled to list on NASDAQ on July 10th, are structured in which newly issued common shares (equivalent to 2.5% of the existing issued shares) are allocated to a third party and deposited with an international depositary institution. On June 24th, the board of SK Hynix resolved that the purpose of the ADS listing is to "expand the global investor base," and that the purpose of the equity capital raising is "capex funding."
The controlling shareholder of SK Hynix is SK Square (20.5% stake). Major shareholders include the National Pension Service (NPS, 8.1%), as well as leading global asset managers and asset owners such as Capital Research (3.5%) and BlackRock (5.1%) etc. During the global roadshow to ensure the success of the ADS offering, the management would have been asked, in concentrated fashion, the following two questions by both existing shareholders and by prospective investors - questions that overshadow any discussion of memory supply-demand outlook or technological innovation:
1) What is the substance of the W 1,100 trillion "Future Business and Management Plan," representing 74% of the company's market cap, which was publicly disclosed on June 29th?
2)Chairman Chey Tae Won unveiled a massive investment plan at a government-led national briefing - was this plan approved by the board of directors?
According to the company's own disclosures, the W 1,100 trillion "Future Business and Management Plan" related to the "Three Mega-Projects for a Great Leap Forward of the Republic of Korea" has neither an implementation timeline nor a board resolution behind it. Although certain portions - such as the Yongin Semiconductor Cluster and the Cheongju production complex - overlap with the stated purpose of the ADS capital raise, the paramount concern of shareholders is apprehension.
Former Financial Services Commission (FSC) Chairman Ko Seung-Beom, who assumed the chairmanship of the board this past March, is urged to convene the board without delay, receive a detailed report from management on the W 1,100 trillion "Future Business and Management Plan," and then determine, jointly with the independent directors, whether to adopt a resolution. Capital allocation — that is, investment in the future (capex, R&D, and M&A) and capital returns (dividends and treasury stock) — is a core function of the board.
The "Future Business and Management Plan" is a litmus test for the amended Korean Commercial Code. The amended Code has clarified the duty of care and the duty of loyalty owed by directors as fiduciary managers. When deliberating and resolving on a project of this scale - one that carries risks equivalent to 74% of market cap — the board must give thorough consideration to a full range of alternatives and select the rational option that most proportionally maximizes the interests of all shareholders. Following the final decision, the board must, for the sake of procedural legitimacy, transparently disclose the relative strengths and weaknesses of each option considered and the rationale for the choice ultimately made.
The standing of Chairman Chey, who on June 20th took the unusual step of personally announcing a large-scale, long-term investment direction, is itself an issue. Under the Monopoly Regulation and Fair Trade Act, Chairman Chey constitutes the same person (동일인) for the SK Group; he is the chairman and registered director of SK Inc, the ultimate parent holding company, which may carry conflict of interest with SK Hynix. Yet at SK Hynix itself, he holds only the title of Chairman - an unregistered, non-executive position. According to Korean disclosures, his role at SK Hynix is described as "Chairman," whereas the F-1 registration statement filed with the U.S. SEC characterizes his duties as "Visionary Stewardship." Chairman Chey also holds no direct equity stake in SK Hynix. The fact that a person who is neither a member of the SK Hynix board nor a registered director of the company publicly announced a massive investment plan prior to board approval runs counter to the OECD Principles of Corporate Governance. We urge each operating entity within the SK Group to exercise its own independent judgment through its own board of directors.
SK Hynix's management and board may be harboring the expectation that, once the ADS listing achieves a "broader global investor base," the company will naturally be valued at levels comparable to Micron or other leading U.S. semiconductor firms. This is a profoundly naive notion. An ADS listing does not, in itself, translate into an equity valuation re-rating. A re-rating can only occur once governance has been improved. The board must be insulated from Group-level influence, transparency must be enhanced, and every decision must be made, in accordance with the amended Korean Commercial Code in a manner that "protects the interests of the total shareholders and treats the interests of all shareholders equitably."
SK Hynix's board of directors has considerable room for improvement in its composition. Of the six independent directors, four are academics and former public officials with no business experience whatsoever. We ask for rationale for the appointment of former Financial Services Commission (FSC) Chairmen to chair the boards of two leading companies - SK Hynix (Ko Seung-Beom) and Samsung Electronics (Shin Je-Yoon). The six independent directors - Chairman Ko, Director Jeong Deog-Kyoon, Director Kim Zeong-Won, Director Yang Dong-Hoon, Director Sohn Hyun-Chul, and Director Choi Gahng-Gook - must themselves undertake the effort to secure genuine independence.
July 9th, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee