SK hynix (000660.KS) has effectively become the second-largest shareholder in Japanese semiconductor company Kioxia after Bain Capital, formerly Kioxia's top shareholder, sold off a large portion of its stake. Some observers predict that SK hynix could eventually emerge as the largest shareholder, given that Toshiba, which has risen to the top shareholder position, is also selling down its holdings.
According to the Nikkei on the 26th, Bain Capital said that last month it sold most of its Kioxia shares through disclosures such as large shareholding reports, generating sale proceeds of about 2.5 trillion yen (about 22 trillion won). In 2018, Bain Capital acquired a 55% stake in Toshiba Memory (now Kioxia) through four special purpose companies (SPCs).
With Bain Capital's stake sale, Toshiba, which holds a 15% stake in Kioxia, became the largest shareholder. The second-largest shareholder is an SPC of which SK hynix is the effective owner, currently holding a 14% stake. However, SK hynix has not yet converted its convertible bonds (CBs) into shares, so to become a shareholder with actual voting rights, it must pass antitrust reviews in various countries.
Following Bain Capital, Toshiba has also continued to sell Kioxia shares. At the time of Kioxia's initial public offering (IPO), Toshiba's stake was about 40%, but since this spring it has accelerated the sale of its stake, reducing its holdings to 18.5% in March, 16.1% in May, and 15.1% this month. As of March, the proceeds Toshiba earned from selling Kioxia shares stood at about 800 billion yen, more than double its investment.
As Toshiba has said it will continue to sell Kioxia shares and use the proceeds for shareholder returns, some analysts suggest that SK hynix could rise to become Kioxia's largest shareholder. It currently has no voting rights, but if it receives approvals under the competition and antitrust laws of various countries and converts its CBs into shares, it can become a Kioxia shareholder with voting rights. SK has pledged not to hold more than 15% of the company's total voting rights until 2028.
However, since SK hynix and Kioxia are direct competitors in the NAND flash memory market, Kioxia, as well as the Japanese government, is reportedly viewing the matter sensitively. In a report last month, Kioxia noted that "because they are in a competitive relationship, SK hynix's exercise of voting rights may differ from the interests of general shareholders." SK hynix holds about a 20% global share in the NAND market.
In a recent report, Kioxia also mentioned that "SK hynix has not currently converted its bonds into shares, but it may have already begun the necessary procedures under the antitrust laws, foreign exchange laws, and foreign transaction laws of various countries."
