SK Hynix's U.S. subsidiary Solidigm is facing scrutiny from financial authorities and the Korea Exchange regarding its plans for a Nasdaq listing, with both entities asserting that it falls under dual listing regulations. Lee Chan-jin, the head of the Financial Supervisory Service, indicated during a parliamentary audit that Solidigm's situation qualifies as a dual listing, a stance echoed by the Korea Exchange. This has intensified pressure on SK Hynix as lawmakers demand measures to protect existing shareholders.
According to a response obtained by Representative Ahn Cheol-soo of the People Power Party on October 21, the Korea Exchange determined that Solidigm meets the criteria for a 'subsidiary' as defined in Article 78-2 of the Securities Listing Regulations and Article 70-3 of the Implementation Rules. Consequently, even if Solidigm lists on a foreign exchange, it must comply with shareholder protection obligations applicable to its domestic parent company.
These regulations apply not only to subsidiaries of domestic listed companies but also to affiliated companies with vertical control relationships. They are relevant for listings on both domestic and foreign securities markets.
The Exchange explained that if a subsidiary pursues a dual listing, the parent company must communicate with shareholders and obtain their consent based on the results of a shareholder impact assessment and protection measures. This includes fulfilling five key obligations for shareholder protection, even in the case of a foreign listing.
On October 19, Ahn criticized Solidigm's listing plans on his Facebook page, highlighting the governance structure involving the U.S.-based AI Company, which he claims effectively pushes for a 'five-tier dual listing.'
He expressed concerns that an increase in external shareholders due to Solidigm's listing could dilute the stakes of existing SK Hynix shareholders. Conversely, he argued that SK Group affiliates that invested in AI Company would benefit from the listing.
Ahn urged President Lee Jae-myung to utilize all available public means to prevent Solidigm's listing, warning that allowing it could undermine trust in the domestic stock market.
Financial authorities are also emphasizing the need for dual listing regulation. Lee Chan-jin stated during the National Assembly's Political Affairs Committee audit on October 19 that both the Financial Services Commission and his agency are assessing whether Solidigm's listing constitutes a dual listing. However, further legal judgment is required to determine if it falls under the domestic securities registration requirements.
Nonetheless, it remains a separate issue whether domestic financial authorities can directly prohibit Solidigm's listing on the U.S. market. If Solidigm proceeds with its Nasdaq listing, the process will follow the regulations set by the U.S. Securities and Exchange Commission (SEC) and Nasdaq. While the Korea Exchange does not have the authority to directly review or deny the U.S. listing, it can oversee the compliance of the domestic parent company's shareholder protection obligations. There are rumors in the securities industry that the Financial Supervisory Service may impose financial penalties of up to 2 billion won in this context.
On October 1, SK Hynix stated in an official position that it is exploring various options to enhance Solidigm's competitiveness, but no decisions have been finalized. The company also indicated that it would carefully consider the impact of external funding on existing shareholders and review shareholder protection measures.
* This article has been translated by AI.
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