(News) Kioxia IPO paves way for SK Hynix to secure funds for HBM investments

Kioxia has pushed ahead with its IPO plans and initiated the process on August 23. This development comes after Bain Capital, a US private equity firm with a majority stake in Kioxia, filed an application for listing with the Tokyo Stock Exchange on the same day, according to Nikkei.

Kioxia, formerly Toshiba Memory Corporation, was spun off from Toshiba and renamed in 2018. Bain Capital runs a special purpose vehicle that, together with South Korea’s SK Hynix, owns a 56% stake in Kioxia Holdings, making it the largest shareholder. Toshiba continues to hold a 41% stake.

SK Hynix first invested in Kioxia in 2018, providing a total of 4 trillion won (about $2.9 billion). 2.7 trillion won of this investment went to a private equity fund led by Bain Capital and 1.3 trillion won was used to acquire Kioxia’s convertible bonds issued by Toshiba. However, the latest report by Korean media outlet BusinessKorea highlights that SK Hynix has struggled to recoup its investment due to Kioxia’s delayed IPO, failed merger attempts and a weak semiconductor market.

Kioxia had planned to list on the Tokyo Stock Exchange in 2020, but escalating trade tensions between the US and China led to a delay. In 2023, Kioxia attempted to merge with Western Digital’s memory division to better compete with Samsung Electronics in the NAND flash market, but the plan was blocked by SK Hynix.

Despite these challenges, Kioxia posted a net profit of 69.8 billion yen in the second quarter of this year, its highest profit in a second quarter, as demand for memory for smartphones and PCs bottomed out. With signs of recovery in the semiconductor market, Kioxia is pushing for another IPO to increase its financial flexibility.

According to Nikkei, Bain Capital and Toshiba are expected to gradually reduce their stakes through share sales after the listing. SK hynix is ​​also likely to sell part of its stake to recoup its investment while maintaining strategic relationships with Kioxia and Toshiba.

BusinessKorea believes that if Kioxia achieves a high valuation and successfully goes public later this year, SK Group could recoup its investment, allowing SK Hynix to reinvest in high-bandwidth memory (HBM) for AI applications.

(Image credit: Kioxia)