SK hynix's American depository receipts (ADR) jumped more than 12% on their first day on the Nasdaq, making a successful debut. Market attention is shifting to whether the ADR premium formed in the United States will be reflected in the domestic common shares.
On the 12th, according to the financial investment industry, SK hynix ADR closed at $168.01 on the Nasdaq in the United States on the 10th (local time), up 12.76% from the offer price of $149. Early in the session, it rose to $170, gaining nearly 14% over the offer price.
ADR are securities designed to allow overseas investors to indirectly transact the underlying shares on the local stock market. For SK hynix ADR, 10 ADR represent one domestic common share, and investors can exchange ADR and domestic common shares with the required procedures.
In the market, some say that if ADR prices are set higher in the United States, domestic common shares could gradually be affected through arbitrage. In theory, when ADR trade at a higher price than the underlying shares, it is possible to buy domestic shares, convert them into ADR, and then execute a sale transaction in the U.S. market. If such transactions are repeated, the price gap between the two markets naturally narrows.
However, many note that actual price discrepancies do not resolve immediately. Issuance and conversion of ADR face constraints such as deposit procedures and issuance limits, making it difficult to conduct arbitrage right away, and if investor demand in the U.S. market exceeds supply, a certain level of premium may persist. In fact, TSMC's ADR have traded at higher prices than the Taiwan common shares for a prolonged period.
In the securities industry, the view is that for the time being, rather than the day-one ADR gain itself, attention should focus on how much of the premium formed in the U.S. market is transmitted to the domestic market, and whether changes in supply and demand such as short selling and margin trading emerge.
Meanwhile, the ADR listing has also delivered record-sized fee revenue for global investment banks (IB). According to the prospectus, the underwriting fee is 388.86845 billion won, or 0.97% of the total offering amount (about 40 trillion won). The four joint bookrunners—Bank of America (BofA), Citigroup, Goldman Sachs, and JPMorgan—are each estimated to receive around 95 billion won in fees.