UBS Recommends Purchasing SK hynix's Upcoming ADR and Selling Its Seoul-Listed Shares

Deep News13:42

UBS Group suggests that investors should buy the American Depositary Receipts (ADRs) that SK hynix plans to issue and simultaneously sell the chipmaker's shares listed in South Korea, as the former may trade at a premium.

The Swiss bank's sales and trading division noted in a client report that for investors such as hedge funds, these ADRs could be more appealing than the Korean shares due to higher holding efficiency and lower costs. The report also indicated that some global portfolio managers who do not currently hold its Seoul-listed shares might also be able to purchase these US securities.

"Going long its ADRs and shorting its Korean shares from day one seems like a straightforward decision," the UBS report stated. "Given that an ADR discount is unlikely to materialize, the risk is very limited, making this a trade that can be executed on a very large scale."

SK hynix commenced its official roadshow for the US listing on Monday, planning to sell ADRs representing approximately 17.79 million common shares, valued at around $28 billion based on last Friday's closing price. The company's shares listed in Seoul have surged more than 220% this year, driving its market capitalization to around $1 trillion.

The UBS report added that global retail investors might also be drawn to these ADRs, as they typically have relatively minimal holdings of its Seoul-listed shares.

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